Moneycontrol Bureau
While the Modi government is expected to announce a slew of sops including extended tax exemption for startups in the Budget. It is expected that many of these schemes will get a face-lift during this year's Budget.Here is a look at key announcements made during the launch of Start Up India and while presenting the Union Budget 2016:
1) Rs 10,000 crore fund for startups
The government set-up a fund for startups with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over a period of four years. The fund currently under SIDBI is being managed by a board with private professionals drawn from industry bodies, academia, and successful startups. As a standing guarantee against risks, LIC was co-investor to help the flow of venture debt. The fund has further invested in other VC funds.
Expectation: The fund will be allowed to invest in mature and less risky startups by the VC funds
2) Three year tax holiday for startups
The 100 percent tax exemption for the first 3 years was announced by Indian Finance Minister Arun Jaitley in the Union Budget 2016. Since many startups are in losses for over 5 years of their existence, tax sops wre not availed by internet startups.
Expectation: Tax holiday to be widened to 5 years
3) Employee Provident Fund
The Government planned to pay an EPF contribution of 8.33 percent of all new employees for the first three years of employment, helping startups to save 12 percent cost and provide security benefits to the employees. However, the scheme benefited only those salary up to Rs 15,000 per month.
Expectation: No change
4) One- day incorporation of companies
The Finance Minister reiterated about the provisions to register a company in one day through mobile application or web portal. This included all the clearances, approvals and registrations. However, a private limited company still takes over 45-60 days to register.
Expectation: To be simplified. Yet to be made fully operational, companies still face a lot of hurdles in incorporation
5) Patent protection
A fast-track system for patent examination with an 80 percent rebate to encourage the creation and protection of its intellectual property was conceptualised by central government. Main aim of this step was to promote awareness and adoption of the Intellectual Property Rights (IPRs) central government. Since most startups in India are in the services regime and have less IP it has not impacted much. But it has given a boost to hardware and product startups who wish to register their IP in India.
Expectation: No change
6) Rs 500 crore to support SC/ST and women entrepreneurs
The Finance Minister allocated Rs 500 crore for Stand-Up India scheme. The government planned to partner with Dalit Indian Chamber of Commerce and Industry (DICCI) to set up entrepreneurial hubs from entrepreneurs from the backward classes.
Expectation: More sops for entrepreneurs from women and SC/ST categories.
7) Service Tax exemption for registered bodies
A service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojna and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship were exempted.
Expectation: Exemption to remain same
8) A credit guarantee fund for startups
To catalyze entrepreneurship a credit guarantee mechanism was announced to providing credit to innovators across all sections of society and help startups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI.
Expectation: It could be widened and the fund could be structurally changed
9) Research parks
The government planned to set up seven new research parks, including six in the Indian Institute of Technology campuses and one in the Indian Institute of Science campus, with an investment of Rs.100 crore each. The parks will give boost to research in technology.
Expectation: No change
10) Faster exits for startups
To make it easier for startups to shut down operations. The government proposed to assist the entrepreneurs in easy winding down of companies, which currently takes over 2-3 years.
Expectation: Failed startups still face problems in shutting down. However, new norms allow companies to remain dormant instead of completely winding down.
(Update: The Credit Guarantee Fund has been widened today to Rs 7500 crore vide an announcement by the Union Finance Minister.) Follow @startup_18
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