The Startup India Scheme is a major initiative launched by the Indian government to promote innovation, support entrepreneurship, and stimulate economic growth by establishing new startups. Introduced with the vision of transforming India into a hub of innovation and entrepreneurial activity, the program aims to build a supportive environment for startups by offering essential resources and assistance. By providing various incentives, such as tax benefits, simplification of regulatory processes, and access to funding, the scheme positions India as a leading destination for startups globally. This article explores the main features, advantages, and effects of the Startup India Scheme, highlighting how it has contributed to the growth of the startup ecosystem in the country and the broader impact on the Indian economy.

When was startup india scheme launched

The Startup India Scheme was officially launched on January 16, 2016, marking a significant and historic moment in India’s journey towards economic and entrepreneurial development. This landmark initiative was inaugurated by Prime Minister Narendra Modi during a grand and well-publicized event held at Vigyan Bhavan in New Delhi. The launch event was graced by the presence of numerous dignitaries, industry leaders, and budding entrepreneurs from various sectors, which underscored the scheme’s pivotal role in promoting innovation and creativity across the country.

The primary objective of the Startup India Scheme is to foster a spirit of entrepreneurship and stimulate robust economic growth by providing comprehensive support to new startups. This support includes financial assistance, mentorship, networking opportunities, and various incentives designed to ease the startup process. By cultivating a favorable and nurturing environment for new businesses, the Startup India Scheme aspires to transform India into a global innovation hub and a key player in the realm of economic advancement. Through these efforts, the scheme aims to significantly enhance the nation’s overall prosperity, creating a more vibrant and dynamic economy that benefits all citizens.

How to Start a Startup in India

The Government has taken a few significant measures to simplify the process of entering into the Startup India scheme. These measures aim to make it easier and more accessible for budding entrepreneurs and innovative ventures to become a part of this initiative. Let’s discuss the few key measures taken to motivate and encourage startups to enter into the scheme, ensuring they can benefit from the various incentives and support systems provided by the government.

Similar to other government initiatives, the Startup India Scheme requires certain administrative procedures and documentation. To streamline the process and make it more efficient for aspiring entrepreneurs, the Government has implemented several comprehensive measures:

• The Government of India has established Startup India hubs across various locations to handle tasks such as incorporation, registration, and grievance resolution. These hubs are equipped with dedicated staff to assist startups in navigating the complex regulatory landscape and ensure that their operations kick off smoothly.
• There are both physical and online portals available for initiating the application process. These portals not only make the process more accessible but also expedite tasks such as the acquisition of patents and intellectual property rights, which are crucial for safeguarding innovations and business ideas.

Additionally, any startup can close its operations within 90 days of starting. This provision was introduced following the Insolvency and Bankruptcy Bill of 2015, which aims to facilitate the swift winding up of companies. This legislative framework is designed to reduce the bureaucratic hurdles and financial burdens associated with closing a business, thereby encouraging more risk-taking and innovation among entrepreneurs. By providing a clear and quick exit strategy, the government ensures that entrepreneurs can focus on their next venture without being bogged down by prolonged administrative procedures.

A significant element of the program is the government’s provision of various financial aids to encourage participation. These aids are aimed at reducing the financial burden on startups, thereby fostering a more supportive environment for innovation and growth. Let’s review some of the measures taken by the Government to achieve this.

The Indian government has established a substantial fund with a corpus of 2,500 crores annually for four years, totaling 10,000 crores. These funds are allocated to support investment in startups, providing them with essential capital for growth and innovation. Additionally, special funds offer significant tax exemptions on income tax and capital gains for up to three years from the startup’s inception. This tax relief allows startups to reinvest their earnings back into the business instead of paying high taxes.

However, the scheme has certain exclusions. Investments made by venture capitalists and incubators are not eligible for these benefits. This exclusion aims to focus financial aids directly on startups rather than established investors who might not need the same level of government support. By targeting financial aids in this way, the government seeks to maximize the scheme’s impact and ensure that benefits reach those who need them most.

Main Benefits of Startup India Scheme

• Financial benefits. The Indian Government offers a substantial 80% discount on patent costs specifically for startup companies, recognizing the unique challenges they face. Startups frequently develop innovative products or services that require patents to protect their intellectual property and ensure their business ideas are safeguarded. With this startup scheme in place, the process of patent registration is not only more affordable but also considerably expedited, allowing startups to move forward with their ventures more efficiently and with greater confidence in the security of their innovations.
• Income Tax benefits. A major financial advantage for companies is the tax exemption available for the first three years after their establishment, which helps new businesses manage their finances during their initial phase. Additionally, companies can benefit from a capital gains tax exemption by investing in funds aimed at promoting economic growth and innovation, typically focused on high-growth sectors. The Inter-Ministerial Board is essential in this process, as it validates startups and grants them eligibility for tax benefits under the startup scheme through certification. This certification formally recognizes the company’s status, allowing them to access these financial benefits. The certification process involves a detailed evaluation of the startup’s business model, growth potential, and adherence to regulatory standards.
• Registration Benefits. Typically, the registration process for new businesses is considered quite cumbersome, involving numerous administrative steps and bureaucratic hurdles. Entrepreneurs often find themselves navigating a complex web of paperwork and regulations. Therefore, to address these challenges and support budding enterprises, the Indian government has established various Startup Hubs. These hubs are designed to streamline not just the application process, but also the registration and grievance processes, making it easier for startups to get off the ground. By centralizing these services, the government aims to foster innovation and encourage more individuals to embark on entrepreneurial ventures.
• Government Tenders. Entrepreneurs often pursue government tenders because they promise substantial business opportunities and significant financial gains. These tenders can be highly lucrative and offer long-term stability for businesses. However, they are typically difficult to secure due to the competitive nature of the bidding process and stringent requirements. Experienced companies usually have an edge, but under the current program, startups are given priority. India Startup Scheme aims to encourage innovation and provide new businesses with opportunities, even if they lack prior experience with government tenders or managing large volumes. By leveling the playing field, the program seeks to foster a more inclusive and dynamic market environment.
• Huge Networking Opportunities. Awareness, word-of-mouth marketing, and reputation are influenced by the number of people familiar with your startup and your connections with other startups. This usually develops gradually over time. The scheme organizes biannual startup festivals that bring together all platforms, helping companies expand their networks and explore new markets and collaborations. Another key benefit of the scheme is the provision of intellectual property rights protection and efforts to raise awareness about it. Additionally, the government of India is continually improving these benefits as the scheme evolves.