Young Indians today have the conviction to venture out on their own and a conducive ecosystem lets them

watch their ideas come to life. In today’s environment we have more Startups and entrepreneurs than ever
before and the movement is at the cusp of a revolution. However, many Startups do not reach h their full
potential due to limited guidance and access.

Startup India is a flagship initiative of the Government of India, intended to build a strong eco-
system for nurturing innovation and Startups in the country that will drive sustainable economic
growth and generate large scale employment opportunities.

What is a Start up?

Process of Recognition

Compliance Regime based on Self-Certification

Legal Support

Exemptions under Companies act 2013

Providing Funding Support

Incentives by RBI

Tax Incentives

Tax Exemption to Startups

Slide 1

What is a start up?

23 may 2017 notification-

An entity shall be considered as a Startup:

a) if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or

registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a

limited liability partnership (under the Limited Liability Partnership Act, 2008) in India; and

b) up to seven years from the date of its incorporation/ registration; which earlier was 5 years

, in the case of Startups in the biotechnology sector, the period shall be up to ten years from the date of its
incorporation/

registration; and

c) if its turnover for any of the financial years since incorporation/ registration has not exceeded

Rupees 25 crores; and

d) if it is working towards innovation, development or improvement of products or processes or

services, or if it is a scalable business model with a high potential of employment generation or

wealth creation.

Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall
not be considered a start up.
SLIDE 2

Building a brand takes years of strategizing, planning, and money; a fact some of the biggest brands in the world
would easily confirm. . For a new-age business, a nifty logo and a catchy name around its product become
equally crucial to creating an impact and evoking strong passion among consumers in the long run.

Process of recognition
The process of recognition as a ‘Startup’ shall be through an online application made over the mobile app/

portal set up by the Department of Industrial Policy and Promotion. Entities will be required to submit the

online application along with the Certificate of Incorporation/ Registration and other relevant details as may

be sought. Startups also have to submit a write-up about the nature of business highlighting how is it working

towards innovation, development or improvement of products or processes or services, or its scalability in

terms of employment generation or wealth creation.

SLIDE 3

Self certification scheme - The practice of giving information about oneself or one's company in a formal
statement rather than being obliged to ask a third party to do so.

COMPLIANCE REGIME BASED ON SELF-CERTIFICATION Compliance norms have been eased in order
to reduce the regulatory burden on Start-ups thereby allowing them to focus on their core business and keep
compliance cost low.

a) Start-ups falling under the list of 36 “white” category industries have been exempted from all the applicable
compliances under 3 Environment Laws viz. The Water (Prevention & Control of Pollution) Act, 1974; the
Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003 and the Air (Prevention & Control of
Pollution) Act, 1981.

b) Ministry of Skill Development and Entrepreneurship (MSDE) has issued advisory to states to allow start-ups
to self-certify compliance for a period of 1 year with the Apprenticeship Rules, 1992 of Apprenticeship Act
1961 .

c) As per the advisory issued by Ministry of Labour & Employment (MoLE) on 12.01.2016, Startups may self-
certify compliance under 6 Labour Laws; 12 states viz. Chhattisgarh, Delhi, Jharkhand, Madhya Pradesh,
Rajasthan, Uttarakhand, Chandigarh, Gujarat, Daman & Diu, Punjab, Mizoram and Tripura have confirmed
compliance this advisory. MoLE has now increased the tenure of compliance of selfcertification under 6 Labour
laws from 3 to 5 years from setting up of unit. MoLE ‘Shram Suvidha’ portal has been integrated with Startup
India portal for self-certification under 6 labour laws.

1.For the first year may not be inspected

2. Start ups may be taken up for inspection when very credible and verifiable complaint is filed in writing and
approval has been obtained from atleast one level senior to inspecting officer and central analysis and
intelligence unit.
SLIDE 4 - Legal support

The Startup India Hub

(Hub) is a one of its kind online platform for all stakeholders of the startup ecosystem in India, including
startups, investors, mentors, incubators, accelerators, aspiring entrepreneurs, service providers and government
bodies. It not only provides an opportunity to connect with other members of the ecosystem but also gives
access to important resources such as its learning and development program, information about relevant
government schemes, a forum to brainstorm and discuss, news and blogs among others.

The Hub is developed under Startup India, the flagship initiative of Government of India. Hub is hosted under
Invest India – the national investment promotion and facilitation agency of India that also hosts the ‘Make in
India’ campaign. Invest India is a not-for-profit company and is promoted by Department of Industrial Policy &
Promotion (DIPP), Ministry of Commerce and Industry (Government of India), State Governments of India,
NASSCOM, CII and FICCI.

Startup India hub was operationalised on 1st April, 2016 to resolve queries and provide handholding support to
Startups. The hub has handled more than 57,000 queries from Startups through telephone, email and Twitter

Mobile app

Information Availability: The portal and mobile app provide up-to- date information on various notifications/
circulars issued by various Government ministries/ departments, towards creation of a conducive ecosystem for
Startups. The portal and mobile app provide information regarding incubators and funding agencies recognized
for the purpose of recommending Startups (as part of Startup recognition application). A comprehensive list of
FAQs is also available to help Startups, Incubators and Funding Agencies use the portal and mobile app more
effectively.

Application for Startup Recognition: The process of recognition is simple and user friendly and involves a
single page application form that a user can fill either through a web interface or through mobile app. Formats of
the recommendation/ support letters that need to be attached as part of the application form have been published
on the portal and mobile app.

· Real Time Startup Recognition: A real time recognition certificate is provided to Startups on completion
of the application process. A digital version of the final certificate of recognition is available for download,
through the portal and mobile app.

· Verification of Recognition Certificate: The certificate of recognition is verifiable through the portal and
mobile app by entering the Startup Recognition/ Certificate Number.

· Approval of Inter-Ministerial Board: verify the eligibility of Startups opting to avail Tax and IPR related
benefits and to provide a certificate of eligibility to innovative Startups.

SLIDE 5 –

Fast-tracking Patent Examination at Lower Costs

Slide 5
Intellectual Property Rights (IPR) are emerging as a strategic business tool for any business organization to
enhance industrial competitiveness. The scheme for Startup Intellectual Property Protection (SIPP) shall
facilitate filing of Patents, Trademarks and Designs by innovative Startups

Government to bear facilitation cost: Under this scheme, the Central Government shall bear the entire fees of the
facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear
the cost of only the statutory fees payable. Panel of facilitators to assist in filing of IP applications. Fast-tracking
of Startup patent applications

Rebate on filing of application: 80%

Under the scheme for Startups Intellectual Property Protection, Patentapplicants have received the benefit of up
to 80% rebate in patent fees and free legal assistance. Startups have also availed benefit of fees rebate in
expedited examination filing fees (Form 18(A)). Trademark Rules, 2017

Number of Trade Mark (TM) Forms have been reduced from 74 to 8; To promote e-filing of TM applications,
the fee for online filing has been kept at 10% lower than that for physical filing.; Based on stakeholders
feedback, the fees for Individuals, Start-ups and Small Enterprises have been reduced from that proposed in the
draft Rules – i.e. only Rs 4,500 as against Rs 8,000 for e-filing of TM applications proposed at the draft stage.

has been recently amended to provide 50% rebate in Trademarks filing fee to Startups. Overall, more than 470
Startups have benefitted from the scheme.

Public Procurement for Startups

To create a conducive ecosystem for growth of Startups and provide an equal platform to Startups vis-à-vis the
experienced entrepreneurs/companies in public procurement, relaxed norms of public procurement for micro
and small enterprises have been provisioned in the Procurement Policy of Ministry of Micro, Small and Medium
Enterprises (MSME). In order to promote Startups, Government shall exempt Startups (in the manufacturing
sector) from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical
parameters.

Department of Expenditure has also notified that all Central Ministries / Departments shall relax condition of
prior experience and prior turnover in public procurement to all Startups (whether MSEs or otherwise) subject to
meeting of quality and technical specifications. Department of Public Enterprises has expanded the relaxation to
Central Public Sector Undertakings (CPSUs)

Faster Exit for Startups

Insolvency and Bankruptcy Code, 2016 – in section 55-58 which provides for manner for initiating and time
period required for its completion Startups with simple debt structures or those meeting such criteria as may be
specified may be wound up within a period of 90 days from making of an application for winding up on a fast
track basis.
SLIDE 6

Companies act,

S. 2(40) - Cash flow statement: Startups will no longer be required to include their cash flow statements as part
of their financial statements.

S. 73(2) (a) – (e) – shall no be applicable on start ups.

S. 92(1) - The annual return shall be signed by the company secretary, or where there is no company secretary,
by the director of the company.

S. 173(5) - The MCA now allows startups to hold two board meetings in a calendar year, that is, once in six
months. The gap between two consecutive board meetings must be at least 90 days.

S. 174(3) - Shall apply with the exception that the interested director may also be counted towards quorum in
such meeting after disclosure of his interest pursuant to section 184.”.
SLIDE 7

S.67(2) Financial assistance can be given to its employees for purchase of or subscribing to its own shares or
shares in its holding company

S.121(1) Need not prepare a report on the Annual General Meeting.

S.134(3)(p) Need not prepare a statement indicating the manner in which formal annual evaluation has been
made by the Board of its own performance and that of its committees and individual directors.

S.149(1) Private company need not have more than two directors.

S.149(4) Need not appoint Independent directors on its Board.

S.152(6) A proportion of directors need not retire every year.

S.164(3) Additional grounds for disqualification for appointment as a director may be specified by the company
in its articles.

S.165(1) Restrictive provisions regarding total number of directorships which a person may hold in a public
company do not include directorships held in a private company which is neither a holding
or subsidiary company of a public company.

S.167(4) Additional grounds for vacation of office of a director may be provided in the Articles.

S.190(4) The provisions relating to contract of employment with managing or whole-time directors does not
apply to a private company

S.197(1) Total managerial remuneration payable by a private company, to its directors, including managing
director and whole-time director, and its manager in respect of any financial year may
exceed eleven per cent. of the net profits
Slide 8

To provide funding support for development and growth of innovation driven enterprises. One of key challenges
faced by Startups in India has been access to finance. s. The Fund will be in the nature of Fund of Funds, which
means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture
Funds.

The tenure of the AIF supported under FFS will be initially upto 12 years

FFS shall contribute to the corpus of Alternative Investment Funds (AIFs) for investing in equity and equity
linked instruments of various Startups at early stage, seed stage and growth stages.

Startups shall qualify the norms and criteria as mentioned in the Gazette Notification G.S.R.180 (E) dated
February 17, 2016, issued by Government of India.

Credit guarantee

In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to
encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee
comfort would help flow of Venture Debt from the formal Banking System.

Debt funding to Startups is also perceived as high risk area and to encourage Banks and other Lenders to
provide Venture Debts to Startups, Credit guarantee mechanism through National Credit Guarantee Trust
Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500 crore per year for the next
four years.
SLIDE 9

Sixth Bi-monthly Monetary Policy Statement for 2015-16 steps being taken by the Reserve Bank of India, in
keeping with the Government’s initiatives to promote the ease of doing business -

1. A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to
pool the foreign exchange earnings out of the exports/sales made by the concerned start-up;

2. The overseas subsidiary of the start-up is also permitted to pool its receivables arising from the
transactions with the residents in India as well as the transactions with the non-residents abroad into the
said foreign currency account opened abroad in the name of the start-up;

3. The balances in the said foreign currency account as due to the Indian start-up should be repatriated to
India within a period as applicable to realisation of export proceeds (currently nine months);

4. A start-up is also permitted to avail of the facility for realising the receivables of its overseas subsidiary
or making the above repatriation through Online Payment Gateway Service Providers (OPGSPs) for
value not exceeding USD 10,000 (US Dollar ten thousand) or up to such limit as may be permitted by
the Reserve Bank of India from time to time under this facility; and

5. To facilitate the above arrangement, an appropriate contractual arrangement between the start-up, its
overseas subsidiary and the customers concerned should be in place.
SLIDE 10

Taxation of Share Premium

The CBDT has issued a notification exempting a startup from taxation in respect of share premium received
from resident investors. This means that a startup may now receive funding from resident investors without
having to pay income tax on the amount of investment as exceeds the fair market value of shares (i.e., the share
premium) issued to the investor.

Under The Income Tax Act, 1961, where a Startup (company) receives any consideration for issue of shares
which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable in the hands of
recipient as Income from Other Sources.

Capital gains

Tax exemption on capital gains

Incentives are provided to investors for investing in the Startup ecosystem. With this objective, exemption shall
be given to persons who have capital gains during the year, if they have invested such capital gains in the Fund
of Funds recognized by the Government.

54 EE – capital gains from sale of long term asset - within a period of six months after the date of such transfer,
invested the whole or any part of capital gains in the long-term specified asset, the capital gain

54gb- shares or new asset acquired by co. within 5 yrs of acquisition sold if not charged under 45 will be
charged under 54gb any transfer after 31 mar 2017 will be for start ups from 31 mar 2019
Slide 11

Tax Benefits In order to obtain tax benefits, a Startup should –

i. be a private limited company (as defined in the Companies Act, 2013) or a limited liability partnership
(as defined under the Limited Liability Partnership Act, 2008) which is incorporated on or after the 1st
day of April, 2016 but before the 1st day of April, 2019, and

ii. be working towards innovation, development or improvement of products or processes or services, or

should be a scalable business model with a high potential of employment generation or wealth creation,
and

iii. obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification as
constituted by Department of Industrial Policy and Promotion from time to time.

Section 80-IAC - Startups can now avail income tax exemption for 3 years in a block of 7 years, if they are
incorporated after 1st April 2016.

Proviso - formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of
any such undertaking

not formed by the transfer to a new business of machinery or plant previously used for any purpose.