DECODING BUDGET 2023 FOR STARTUPS
Benefits of startup India registration for new startups including funding schemes available
If you answer yes to all of these questions, you should read on to understand the benefits that registration under the Startup India initiative can provide your entity.
The popularity of startups and the enthusiasm displayed by entrepreneurs led to the government of India starting and promoting the Startup India initiative. The idea of Startup India is to provide an inclusive platform for the growth of startups by empowering them through innovation and technology support. The startups registered under this initiative have access to several benefits.
It must be noted that a new entity created by splitting or reconstructing an existing business will not fall under this category and all conditions have to be met to qualify as a startup.
The benefits offered by a Startup India registration are several and include the following-
Simple User-friendly process
The process of registering a startup under the Startup India initiative is very simple. You can do it via the mobile app or use the website. All you need to do is to fill up a simple online form and upload a few documents. The process is completely contactless and paperless and will barely take a few minutes.
Registering under the Startup India initiative can yield rich benefits. The government provides lists of facilitators of patents and trademarks. Intellectual Property Rights Services are offered at cheaper rates and the response time is also pretty quick. The government bears the facilitator fees while you will bear the statutory fees. You can get an 80 % discount while filing patents.
The government has set up a 10,000 crore rupees fund to provide monetary assistance to startups as venture capital. The government offers guarantees to lenders to encourage banks and financial institutions to lend venture capital to these entities.
You can get a 3 year tax holiday if your startup is incorporated between 1st April, 2016 and 31st March 2022. If you get a certification from Inter-Ministerial Board. You will be eligible for 100% tax rebate on profits for 3 years in a block of 7 years if the annual turnover does not cross Rs 25 crores in any financial year. This gives you a breather to manage your working capital requirements in the initial years of operation.
You are exempted from prior experience/turnover criteria which are applicable for normal companies while applying for government tenders which gives you an advantage.
Research and Development facilities
Seven new Research parks will be set up to facilitate R &D activities for startups. This will give you the scope to focus on your innovations.
Startup compliances have been kept simple to save time and costs. You can self-certify compliances with 9 labour and 3 environment laws via the Startup mobile app.
LTCG exemption for startups
The Income Tax Act has included a new section 54 EE for the purpose of exempting tax on long term capital gains to be availed by eligible startups. To get this benefit, you will have to invest in a fund notified by the Central Government within six months from the date of transfer of the asset. You can make investment in the long-term specified asset up to Rs 50 lakhs which shall remain invested for 3 years. In case of a premature withdrawal, the benefit will be revoked in the year of withdrawal.
TAX EXEMPTION ON INVESTMENTS ABOVE THE FAIR MARKET VALUE
Eligible startups get the benefit of tax exemption on investments above the fair market value.
These investments may include investments made by Indian angel investors, family offices or funds not registered as venture capital funds as well as investments made by incubators.
Choice of Investors
You have the flexibility to choose between venture capitalists and can select your investors.
Ease of Exit
You can shut down your business within 90 days from the date of the winding-up application.
Startup fests will be held twice a year at national and global levels to help entrepreneurs to meet each other and benefit from networking opportunities.
Tax exemption to individuals/HUF on investment of LTCG in startups
Section 54GB has been tweaked to include investment in eligible startups as a basis for exemption of tax on LTCG from the sale of residential property. If any individual or HUF sells a residential property and invests the capital gains in 50% or more equity shares of eligible startups, then the amount invested will be exempt from tax on the condition that the shares are not sold or transferred within 5 years from the date of purchase. The startups can use this amount to buy assets that should not be transferred or sold within 5 years. This incentive is expected to promote investments in eligible startups.
OPTION TO SET OFF LOSSES CARRIED FORWARD AND CAPITAL GAINS IF THERE IS A CHANGE IN OWNERSHIP
If all the shareholders of an eligible startup who have voting power on the last day of the year in which the loss was incurred continue to hold shares on the last day of the previous year in which such loss is to be carried forward, then the carry forward of such loss is permitted, In the case of eligible startups the restriction of holding 51% of voting rights to remain unchanged u/s 79 has been removed.
The need for the criteria of prior experience or turnover is relaxed in the case of startups in the manufacturing sector without any relaxation in quality standards or technical parameters with regard to procurement by the government.
Startups are entitled to receive guaranteed funds through the National Credit Guarantee Trust or SIDBI over a span of 4 years.
There is no inspection for the first three years regarding labour laws
There are several funding schemes launched for the benefit of startups. Some of the prominent ones include –
Pradhan Mantri Mudra Yojana
Under the Pradhan Mantri Mudra Yojana scheme, MUDRA Banks offer loans at very affordable rates to micro-finance institutions and NBFCs who extend the loans to startups and MSMEs.
Pradhan Mantri Mudra Yojana is a unique fund of funds that offers a maximum loan of Rs 10 lakhs, and has been designed to empower budding Indian businessmen. Over 29.55 crore loans amounting to over Rs 15.52 lakh crores have been sanctioned under the scheme till March 21.
New businesses can avail of loans up to Rs 50,000 under Shishu, middle-aged businesses can avail of Rs 5 lakh under Kishor while existing experienced businesses can get up to Rs 10 lakhs.
Credit Guarantee Trust Fund for Micro and Small Enterprises
This is one of the biggest Startup Loan Schemes launched by the Government where an unsecured loan of up to Rs 1 crore is provided to eligible startups and MSMEs.
Monetary Support to MSMEs in ZED Certification Scheme
ZED or Zero Defect and Zero Effect mission are to incentivize manufacturers to create enhanced products with superior quality and zero defects. The purpose is to help manufacturers use world-class processes to ensure that their products are the best in class.
This scheme has been designed to provide financial help to MSMEs to improve their processes and implement cutting edge technology for their business. This would help them compete at a global level. Under this scheme, the government provides a 15% subsidy for investment up to Rs 1 crore for the enhancement of technology for startups and MSMEs in India.
Setting up Design Clinics
In a bid to promote innovation, the MSME ministry has created a design clinic for promoting design related expertise for startups and MSMEs. Under this scheme, the government provides aid of up to Rs 60,000 for attending design seminars and up to Rs 3,75 lakhs or 75% of the cost of a seminar where the entrepreneurial team can learn design theories, latest trends and practices.
Startup Movers can help you register your startup under the Startup India initiative and complete all the formalities in this regard. To know more about their services, you can click on https://www.startup-movers.com/startup-india-registration/