Lok Sabha Question No. 75 (STARRED), answered on 2016-11-21
Subject: Fund for Start-up Companies
Ministry: COMMERCE AND INDUSTRY
Asked by: SUKENDER REDDY GUTHA, BALKA SUMAN

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

STARRED QUESTION NO. 75. TO BE ANSWERED ON MONDAY, THE 21 ST  NOVEMBER, 2016.

## FUND FOR START-UP COMPANIES

## *75. SHRI GUTHA SUKENDER REDDY: SHRI SUMAN BALKA:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज् यवव द्यग ं ्री

- (a) the details of incentives and  encouragements,  financial and  otherwise provided for start-ups;
- (b) whether the Government is planning to set up a Credit Guarantee Fund for encouraging start-up companies in the country;
- (c) if  so,  the  details  thereof  including  the  number  of  companies  which  have availed the facilities under the scheme so far; and
- (d) the  other  steps  taken  to  promote  the  start-up  companies  especially  in  their early formulation?

## ANSWER

वाणिज् यवव द्यग ााज् यं ्रीस् वतं ््रभााा(स्रींतंरीिरंमलााीरीतंाांि( THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a) to (d): A Statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) to (d) OF LOK SABHA STARRED QUESTION NO. 75 FOR ANSWER ON 21 ST  NOVEMBER 2016.

| (a) & (d):   | The Startup India initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive to growth of Startups. Since the launch of the Startup India program, a number of initiatives have been taken to promote Startups. Details are at Annexure.   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b):         | Yes Madam. The Government is formulating a Credit Guarantee Scheme for Startups (CGSS) with a view to encourage banks and other lenders to provide loans to Startups.                                                                                                                             |
| (c):         | Under the proposed scheme, a Credit Guarantee Fund for Startups (CGFS) shall be set up for providing credit guarantee cover (up to a specified limit) to eligible Member Lending Institutions (MLIs) against default in repayment of a loan extended to a Startup.                                |

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## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) & (d)  OF  LOK  SABHA STARRED QUESTION NO. 75 FOR ANSWER ON 21 ST  NOVEMBER 2016.

The Startup India Action Plan consists of 19 action items spanning across areas such  as  'Simplification  and  handholding',  'Funding  support  and  incentives'  and 'Industry-academia partnership and incubation'. Since the launch of the program, a number of forward looking strategic amendments to the existing policy ecology have been introduced, like:

## 1. Fund of Funds

For providing fund support for Startups, Government has  created a 'Fund of Funds for  Startups  (FFS)'  at  Small  Industries  Development  Bank  of  India  (SIDBI)  with  a corpus  of ` 10,000  crore.  The  FFS  shall  contribute  to  the  corpus  of  Alternate Investment  funds  (AIFs)  for  investing  in  equity  and  equity  linked  instruments  of various Startups. The FFS is managed by Small Industries Bank of India (SIDBI) for which  operational  guidelines  have  been  issued.  In  2015-16,  Rs.  500  crores  was released towards the FFS corpus.

## 2. Relaxed Norms in Public Procurement for Startups

Provision  has  been  introduced  in  the  procurement  policy  of  Ministry  of  Micro, Small and Medium Enterprises (Policy Circular No. 1(2) (1)/2016-MA dated March 10, 2016) to relax norms pertaining to prior experience / turnover for Micro and Small Enterprises. Department of Expenditure has issued a notification for relaxing public procurement norms in respect of medium enterprises by all central Ministries/Departments.

## 3. Tax Incentives :

##  3 Year Tax Exemption

The Finance Act, 2016 Section 80- IAC has provision for Startups (Companies and LLPs)  to  get  income  tax  exemption  for  3  years  in  a  block  of  5  years,  if  they  are incorporated between 1st April 2016 and 31st March 2019. To avail these benefits, a Startup must get a Certificate of Eligibility from the Inter-Ministerial Board.

##  Removal of Angel Tax:

Tax  exemption  on  investments  made  in  excess  of  face  value  in  the  shares  of  a Startup company has been introduced on 14 June 2016.

##  Tax Exemption on Capital Gains:

Section 54 EE has been introduced under the Finance Act, 2016 which provides for exemption of capital gain arising out of transfer of long term capital asset invested in a fund notified by Central Government.

Section 54GB of Income-tax Act, 1961 has been amended to provide for exemption from tax on capital gains arising out of sale of residential house or a residential plot of land  if  the  amount  of  net  consideration  is  invested  in  equity  shares  of  eligible Startups.

## 4. Legal Support and Fast-tracking Patent Examination at Lower Costs

A  scheme  for  Startups  IPR  Protection  (SIPP)  for  facilitating  fast  track  filing  of Patents,  Trademarks  and  Designs  by  Startups  has  been  introduced.  The  scheme provides for expedited examination of patents filed by Startups. This will reduce the time taken in getting patents. The fee for filing of patents for Startups has also been reduced up to 80%.

Panels of facilitators for Patents and Trademark applications have been formed to facilitate  the  process  of  patent  filing  and  acquisition.  The  facilitators  would  provide legal guidance and handholding through the entire patent acquisition process free of cost.

## 5. Self-Certification based Compliance Regime :

Compliance norms relating to Environmental and Labour laws have been eased in order to reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.

Ministry  of  Environment  and  Forests  (MoEF)  has  published  a  list  of  36  white category industries. Startups falling under the 'White category' would be able to selfcertify compliance in respect of 3 Environment Acts -

-  The Water (Prevention & Control of Pollution) Act, 1974;
-  The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003;
-  The Air (Prevention & Control of Pollution) Act, 1981.

Further, Ministry of Labour and Employment (MoLE) has issued guidelines to State Governments whereby Startups shall be allowed to self-certify compliance in respect of 6 Labour laws. These shall be effective after concurrence of States/UTs. The Acts are:

-  The Building and Other Constructions Workers' (Regulation of Employment & Conditions of Service) Act, 1996
-  The InterState Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
-  The Payment of Gratuity Act, 1972
-  The Contract Labour (Regulation and Abolition) Act, 1970
-  The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
-  The Employees' State Insurance Act, 1948

So  far 9  States  have  confirmed  compliance  to  the  advisory  issued  by  Ministry  of Labour and Employment (MoLE):

-  Rajasthan
-  Uttarakhand
-  Madhya Pradesh
-  Chhattisgarh
-  Delhi
-  Jharkhand
-  Gujarat
-  Chandigarh
-  Daman & Diu

## 6. Setting up Incubators

 Under  Atal  Innovation  Mission  of  Niti  Ayog,  a  grant-in-aid  of  Rs.  10  crore would be provided to each incubator for a maximum of 5 years to cover the capital and  operational costs in running the centre. NITI Aayog  has  received  232 applications for providing scale up support for established incubation centres.

-  Under  the  Mission,  Niti  Ayog  will  set  up  Atal  Incubation  Centres  (AICs) in public  and  private  sector.  NITI  Aayog  has  received  3658  applications  (1719  from academic  institutions  and  1939  from  non-academic  institution)  for  setting  up  Atal Incubation Centres (AICs) from both Public and Private sector organizations.

## 7. Setting up of Startup Centres and Technology Business Incubators (TBI)

14 Startup Centres and 15 Technology Business Incubators will be setup collaboratively  by  Ministry  of  Human  Resource  Development  (MHRD)  and  the Department of Science and Technology (DST).  As informed by MHRD, out of the 14 Startup Centres, 10 have been approved. Once MHRD releases its share of Rs. 25 lakhs each for the Startup centres, all the Startup centres would be supported and completed by DST by December, 2016.

The target of sanctioning of 15 TBIs is expected to be achieved by December 2016.

## 8. Research Parks

7 Research Parks will be set up as per the Startup India Action Plan. Out of these 7, IIT Kharagpur already has a functional Research Park. Further, DST will establish 1 Research Park at IIT Gandhinagar and the remaining 5 shall be set up by Ministry of Human Resource Development (MHRD).

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