As the governments of the day have started to recognize the importance of entrepreneurs and the businesses and intent to actively support them, we are now entering an era of innovations. As the Indian government is coming forth with multiple initiatives, the environment for starting up is growing warmer each day. It is only smart to stay updated about the government policies and plan accordingly.
The Government of India launched “Startup India” as its flagship initiative in January 2016, with intention of building a strong eco-system for nurturing innovation and Startups in the country. The objective behind this scheme has been to empower the Startups to grow through innovation and design. A Startup India Action Plan was also launched to addresses all aspects of the Startup ecosystem. There are a number of benefits that could be derived under the Startup Action Plan and other government schemes. These benefits could only be claimed if an enterprise is registered under the startup India Scheme.
Following are the three major benefits which could directly and positively affect the startups:
- Saves Money
- Tax exemption
- Income Tax
Startups incorporated after 1st April 2016 are eligible to get a 100% tax exemption for a period of three years, provided that your annual turnover has not exceeded Rs. 25 Crores in any financial year in this span of these 3 years.
An eligible start up can also claim for tax exemptions on long-term capital gains. The condition is that such a gain or a part of it is invested in a fund notified by the Central Government, in a span of 6 months from the date of transfer of the asset; also it is subject to a limit of Rs. 50 Lakhs only. It is a prerequisite that such amount is invested in the specified fund for a minimum period of three years.
Exemptions on investments
It can avail exemptions on the investments which are above the fair market value. These investments include resident angel investors, family funds or the funds which are not registered as venture capital investments. Also the investments made by any incubator above the fair market value are also exempted under the Startup India scheme.
According to the new amendment, an individual or a HUF sells its property to invest in 50% or more equity shares of a startup, is eligible for tax exemption on long-term capital investment. This exemption is subject to the condition that the shares are not sold for 5 years from the date of acquisition. The startups are also required to use the invested amount to purchase assets and not transfer the asset for a similar period.
Government to bear costs
Under the Startup intellectual property protection scheme, the government shall bear complete fees of facilitators for any number of trademarks, designs or patents etc. Specifically for the process of getting a patent, the government will support it by funding the defense of the patent. The company as a consequence would get a rebate of 80% in the fees.
Time is of essence for any business and Startup India registration may help in saving a lot of it. From the starting up process to the winding up of business, the new scheme takes care to cut short the time.
Self-certification & Compliance: Self-certification has been allowed under the new scheme, so it is not required to move to the government offices and get the papers attested. Compliance under nine different environmental & labour laws has also been made easier, as it could be done at the time of registration.
Fast track processes: for the public procurement, a fast track process has been established under the criteria of “prior experience/turnover” for startups in all Central government ministries/ departments. Similarly, Fast track application for the patent related to the patent has been provided and up to 80% rebate has been allowed on the filing as well.
Quicker getting-out: Under the new insolvency and bankruptcy code 2016 it has been provided that winding up of such registered company can be done within 90 days. So the getting out is also now quick and easier.
A fund of Rs. 10,000 crores has been established for investment into startups through the alternate investment fund. Also, over 4 years, credit of Rs. 2000 crores, through National Credit Guarantee Trust Company or SIDBI could be availed. So there are better and easier option of getting credit once a startup has been registered.
While starting up a new business, optimal utilization of resources is one of the key aspects. Now that the importance of the enterprises have been realized by the government, favorable policies are also been made. Such schemes could benefit the business in multiple ways as mentioned above. The advantages are likely to go beyond quantifiable profits, which could further be discovered at a later stage of the business.