Lok Sabha Question No. 2166 (UNSTARRED), answered on 2020-03-04
Subject: National Startup Advisory Council
Ministry: COMMERCE AND INDUSTRY
Asked by: Heena Vijaykumar Gavit, Dhanush M Kumar, Ganesan Selvam, Gautham Sigamani Pon, Soyam Babu Rao

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 2166.

TO BE ANSWERED ON WEDNESDAY, THE 04 TH  MARCH, 2020.

## NATIONAL STARTUP ADVISORY COUNCIL

## 2166.  DR. HEENA GAVIT:

SHRI SOYAM BAPU RAO:

SHRI DHANUSH M. KUMAR:

SHRI SELVAM G.:

SHRI GAUTAM SIGAMAANI PON:

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

वाणिज्य

## एवं उद्योग मंत्री

- (a) whether the Government has set up a National Startup Advisory Council;
- (b) if so, the details thereof and the aims and objectives behind the move;
- (c) the details of the composition of the Council and the time period for which this Council will function;
- (d) whether various problems are being faced by the Indian Startups;
- (e) if so, the details thereof and the corrective steps taken by the Government in this regard;
- (f) whether the Government is encouraging students to take up innovation across all  the economic sectors including semi-urban and rural areas and if so, the details thereof; and
- (g) the  details  of  other  steps  taken  by  the  Government  to  build  a  strong eco-system  for  nurturing  innovation  and  start-ups  in  the  country  to  drive sustainable economic growth and generate large-scale employment opportunities?

## ANSWER

## वाणिज ् य एवं उद्योग मंत्री ( श्री पीयूष गोयल ) THE MINISTER OF COMMERCE & INDUSTRY (SHRI  PIYUSH GOYAL)

- (a) to (c): Yes  Sir,  Department  For  Promotion  of  Industry  and  Internal  Trade (DPIIT)  has  notified  the  structure  of    the  'National  Startup  Advisory Council'  to  advise  the  Government  on  measures  needed  to  build  a strong ecosystem for nurturing innovation and startups in the country to drive sustainable economic growth and generate large scale employment opportunities.  A copy of published notification containing the details regarding aims, objective and composition etc.  is attached at Annexure - I

| (d) to (g):   | The Startup India initiative was announced by Hon'ble Prime Minister of India on 15th August, 2015. The flagship initiative aims 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. Further to this, an Action Plan for Startup India was unveiled by Prime Minister of India on 16th January, 2016. The Action Plan comprises 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 initiative in January 2016, there has been a substantial progress under Startup India Action Plan. A detailed progress made on 19 Action Points of Startup India Action Plan, including various initiatives encouraging students to take up innovation across all the economic sectors including semi-urban and rural areas is enclosed at Annexure-II. DPIIT has held extensive consultations with all the stakeholders and has worked with relevant Government Agencies to identify and address the problems faced by Indian Startups. Many other initiatives beyond the Startup India Action Plan have also been undertaken to address the Tax and other regulatory issues faced by the Startup community for development of overall growth of Startup movement in the country. Summary of achievements made so far under such initiatives is attached at Annexure - III.   |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

******

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (c)  OF  THE  LOK SABHA UNSTARRED QUESTION 2166 FOR ANSWER ON 4 TH  MARCH, 2020.

[To be published in the Gazette of India, Extraordinary, Part-I, Section1]

F. No. 5(24)/2019-Startup India Government of India Ministry of Commerce and Industry Department for Promotion of Industry and Internal Trade Startup India Section

Udyog Bhawan, New Delhi Dated the 21 st January, 2020

## NOTIFICATION

The Central Government hereby constitutes the 'National Startup Advisory Council' to  advise  the  Government  on  measures  needed  to  build  a  strong  ecosystem  for  nurturing innovation  and  startups  in  the  country  to  drive  sustainable  economic  growth  and  generate large scale employment opportunities. The council shall, inter alia , suggest measures to:

- (i) Foster a culture of innovation amongst citizens and students in particular;
- (ii) Promote innovation in all sectors of economy across the country, including semiurban and rural areas;
- (iii) Support  creative  and    innovative  ideas  through  incubation  and  research  and development to transform them into valuable products, processes or solutions to improve productivity and efficiency;
- (iv) Create an environment of absorption of innovation in industry;
- (v) Facilitate public organizations to assimilate innovation with a view to improving public service delivery;
- (vi) Promote creation, protection and commercialization of intellectual property rights;
- (vii) Make it easier to start, operate, grow and exit businesses by reducing regulatory compliances and costs;
- (viii) Promote ease of access to capital for startups;
- (ix) Incentivize domestic capital for investments into startups;
- (x) Mobilize global capital for investments in Indian startups;
- (xi) Keep control of startups with original promoters.
- (xii) Provide access to global markets for Indian startups.
2. The National Startup Advisory Council shall be chaired by Minster for Commerce & Industry, Government of India.
3. The Council shall consist of the following members, namely:-
4. The nominees of the following Ministries/Departments/Organisations, not below the rank  of  Joint  Secretary  to  the  Government  of  India,  shall  be  ex-officio  members  of  the Council:
5. Joint  Secretary,  Department  for  Promotion  of  Industry  and  Internal  Trade  (dealing with startups) shall be the Convener of the Council. Startup India Division of  Department for Promotion of Industry and Internal Trade shall provide secretarial assistance to the Council.
6. The Council shall meet at least once in every quarter. Quorum of the meeting shall be one-third of the total Members of the Board.
7. Traveling/Dearness  allowances  to  the  members  of  the  Council  other  than  official members  shall  be  regulated  as  per  Ministry  of  Finance,  Department  of  Expenditure's Orders/Guidelines.
8. The term of the Non-official members of the Startup Advisory Council shall be for a period of two years or until further orders, whichever is earlier.

|   Sl. No. | Members                                                                | Status                 | Remarks                         |
|-----------|------------------------------------------------------------------------|------------------------|---------------------------------|
|         1 | Founders of successful startups - Up to 10 members                     | Members (Non-official) | Nominated by Central Government |
|         2 | Veterans who have grown and scaled companies in India -Up to 6 members | Members (Non-official) | Nominated by Central Government |

|   3. | Persons capable of representing interests of investors into startups - Up to 10 members     | Members (Non-official)   | Nominated by Central Government   |
|------|---------------------------------------------------------------------------------------------|--------------------------|-----------------------------------|
|    4 | Persons capable of representing interests of incubators and accelerators -Up to 6 members   | Members (Non-official)   | Nominated by Central Government   |
|    5 | Representatives of associations of stakeholders of startups - Up to 6 members               | Members (Non-official)   | Nominated by Central Government   |
|    6 | Representatives of industry associations like CII, FICCI,ASSOCHAM,NASSCOM - Up to 6 members | Members (Non-official)   | Nominated by Central Government   |

|   Sl. No. | Members                                               |
|-----------|-------------------------------------------------------|
|         1 | Office of Pr. Scientific Advisor to the Government    |
|         2 | NITI Aayog                                            |
|         3 | Department Of Revenue                                 |
|         4 | Department Of Financial Services                      |
|         5 | Department Of Expenditure                             |
|         6 | Department Of Commerce                                |
|         7 | Department Of Science And Technology                  |
|         8 | Department Of Bio-Technology                          |
|         9 | Department Of Health &Family Welfare                  |
|        10 | Ministry Of Labour And Employment.                    |
|        11 | Department Of Higher Education                        |
|        12 | Department Of School Education &Literacy              |
|        13 | Ministry Of Corporate Affairs                         |
|        14 | Ministry Of Electronic And Information And Technology |
|        15 | Ministry Of Micro, Small And Medium Entrepreneurs     |
|        16 | Central Board of Direct Taxes                         |
|        17 | Central Board of Indirect Taxes and Customs           |
|        18 | Small Industrial Development Bank Of India            |

(Anil Agrawal) Joint Secretary

The Manager Government of India Press, Mayapuri, Ring Road, New Delhi - 110064.

Copy to :-

1. All Chief Secretaries of the States and Administrators of UTs.
2. All Officers as per para 4 of the notification.
3. Web Master of Department for Promotion of Industry and Internal trade, Udyog Bhavan, New Delhi. It is requested that this may kindly be displayed on the website of the Department for broad publicity.
4. Guard file / Notification file
5. Press Information Bureau, Shastri Bhawan, New Delhi.

(L. Madan Kumar Reddy) Under Secretary to the Govt. of India

Tel.No. 23063510 E-mail: lmk.reddy@gov.in

*******

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (d)  TO  (g)  OF  THE  LOK SABHA UNSTARRED QUESTION 2166 FOR ANSWER ON 4 TH  MARCH, 2020.

## Detailed progress made on the 19 Action Points of Startup India Action Plan

( Objective and details have been reproduced as published in the Startup Action Plan. Progress has been updated as on 26 th February, 2020 )

## 1. Compliance Regime based on Self-certification Objective

To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.

## Details

-  Regulatory formalities requiring compliance with various labour and environment laws are time consuming and difficult in nature. Often, new and small  firms  are  unaware  of  nuances  of  the  issues  and  can  be  subjected  to intrusive  action  by  regulatory  agencies.  In  order  to  make  compliance  for Startups  friendly  and  flexible,  simplifications  are  required  in  the  regulatory regime.
-  Accordingly,  the  process  of  conducting  inspections  shall  be  made  more meaningful and simpler. Startups shall be allowed to self-certify  compliance (through the Startup mobile app) with 9 labour and environment laws (refer below).  In  case  of  the  labour  laws,  no  inspections  will  be  conducted  for  a period  of  3  years.  Startups  may  be  inspected  on  receipt  of  credible  and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.
-  In case of environment laws, Startups which fall under the 'white category' (as defined by the Central Pollution Control Board (CPCB)) would be able to selfcertify  compliance  and  only  random  checks  would  be  carried  out  in  such cases.

## Progress

Ministry of Environment, Forest & Climate Change (MoEF&CC) has published a list of 36 white category industries. Startups falling under the "White category" would be able to self-certify compliance in respect of 3 Environment Acts -

1. The Water (Prevention & Control of Pollution)Act, 1974
2. The Water (Prevention & Control of Pollution) Gess (Amendment)Act, 2003
3. 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 are effective after concurrence of States/UTs. The Acts are:

1. The Building and Other Constructions Workers' (Regulation of Employment & Conditions of Service )Act, 1996
2. The Inter- State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
3. The Payment of Gratuity Act, 1972
4. The Contract Labour (Regulation and Abo I ition) Act, 1970
5. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
6. The Employees' State Insurance Act, 1948.

27  states  and  UTs  have  implemented  the  process  of  self-  certification  to  startups under 6 labour laws. 9 States (Haryana, Madhya Pradesh, Maharashtra, Rajasthan, Gujarat, Uttar Pradesh, Punjab, Uttarakhand, and Delhi) have integrated their portals with Shram Suvidha Portal. Overall, 169 DPIIT recognized Startups have availed the benefits of self-certification.

## 2. Startup India Hub

## Objective

To  create  a  single  point  of  contact  for  the  entire  Startup  ecosystem  and  enable knowledge exchange and access to funding Details

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 their full potential due to limited guidance and access.

The Government of India has taken various measures to improve the ease of doing business  and  is  also  building  an  exciting  and  enabling  environment  for  these Startups, with the launch of the 'Startup India' movement.

The 'Startup India Hub' is a key stakeholder in this vibrant ecosystem and will:

-  Work  in  a  hub  and  spoke  model  and  collaborate  with  Central  &  State governments,  Indian  and  foreign  VCs,  angel  networks,  banks,  incubators, legal partners, consultants, universities and R&D institutions
-  Assist Startups through their lifecycle with specific focus on important aspects like  obtaining  financing,  feasibility  testing,  business  structuring  advisory, enhancement of marketing skills, technology commercialization and management evaluation
-  Organize mentorship programs in collaboration with government organizations, incubation centres, educational institutions and private organizations who aspire to foster innovation. To all young Indians who have the courage to enter an environment of risk, the Startup India Hub will be their friend, mentor and guide to hold their hand and walk with them through this journey.

## Progress :

A dedicated Startup Hub team was setup under Invest India. Team members have been assigned to different states for assisting them in formulating and implementing policies  to  facilitate  growth  of  startups.  A  total  of  1,71,956  queries  have  been addressed

## 3. Startup India Portal and Mobile App

## Objective

To  serve  as  the  single  platform  for  Startups  for  interacting  with  Government  and Regulatory  Institutions  for  all  business  needs  and  information  exchange  among various stakeholders

## Details

In order to commence  operations,  Startups  require  registration with relevant regulatory  authorities.  Delays  or  lack  of  clarity  in  registration  process  may  lead  to delays in establishment and operations of Startups, thereby reducing the ability of the  business  to  get  bank  loans,  employ  workers  and  generate  incomes.  Enabling registration process  in  an  easy  and  timely  manner  can  reduce  this  burden significantly.

Besides,  Startups  often  suffer  from  the  uncertainty  regarding  the  exact  regulatory requirements  to  set  up  its  operations.  In  order  to  ensure  that  such  information  is readily available, it is intended that a checklist of required licenses covering labour licensing,  environmental  clearances  etc.  be  made  available.  Currently,  the  Startup ecosystem  in  India  also  lacks  formal  platform(s)  for  Startups  to  connect  and collaborate with other ecosystem partners.

Towards these efforts, the Government shall introduce a Mobile App to provide onthe-go accessibility for:

-  Registering Startups with relevant agencies of the Government. A simple form shall  be  made  available  for  the  same.  The  Mobile  App  shall  have  backend integration  with  Ministry  of  Corporate  Affairs  and  Registrar  of  Firms  for seamless information exchange and processing of the registration application
-  Tracking the status of the registration application and anytime downloading of the registration certificate. A digital version of the final registration certificate shall be made available for downloading through the Mobile App
-  Filing  for  compliances  and  obtaining  information  on  various  clearances/ approvals/ registrations required
-  Collaborating with various Startup ecosystem partners. The App shall provide a  collaborative  platform  with  a  national  network  of  stakeholders  (including venture funds, incubators, academia, mentors etc.) of the Startup ecosystem to have discussions towards enhancing and bolstering the ecosystem
-  Applying for various schemes being undertaken under the Startup India Action Plan

The App shall be made available from April 01, 2016 on all leading mobile/ smart devices' platforms. The Startup portal shall have similar functionalities (being offered through the mobile app) using a richer web-based User Interface.

## Progress :

Startup India portal and app were launched in April 2016. At present, 3,79,956 users are registered on the Startup India Portal and Startup India Website had more than 7 million views. A total of 28,951 Startups have been recognized by the portal till Feb 26, 2020.

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

To  promote  awareness  and  adoption  of  IPRs  by  Startups  and  facilitate  them  in protecting  and  commercializing  the  IPRs  by  providing  access  to  high  quality Intellectual  Property  services  and  resources,  including  fast-track  examination  of patent applications and rebate in fees.

## Details

Intellectual Property Rights (IPR) are emerging as a strategic business tool for any business  organization  to  enhance  industrial  competitiveness.  Startups  with  limited resources and manpower, can sustain in this highly competitive world only through continuous growth and development-oriented innovations; for this, it is equally crucial that they protect their IPRs. The scheme for Startup Intellectual Property Protection (SIPP)  shall  facilitate  filing  of  Patents,  Trademarks  and  Designs  by  innovative Startups. Various measures being taken in this regard include:

-  Fast-tracking of Startup patent applications: The valuation of any innovation goes up immensely, once it gets the protective cover of a patent. To this end, the  patent  application  of  Startups  shall  be  fast-tracked  for  examination  and disposal,  so  that  they  can  realize  the  value  of  their  IPRs  at  the  earliest possible.
-  Panel  of  facilitators to assist in filing of IP applications: For  effective implementation of the scheme, a panel of 'facilitators' shall be empanelled by the Controller General of Patents, Designs and Trademarks (CGPDTM), who shall also regulate their conduct and functions. Facilitators will be responsible for  providing  general  advisory  on  different  IPRs  as  also  information  on protecting  and  promoting  IPRs  in  other  countries.  They  shall  also  provide assistance  in  filing  and  disposal  of  the  IP  applications  related  to  patents, trademarks and designs under relevant Acts, including appearing on behalf of Startups at hearings and contesting opposition, if any, by other parties, till final disposal of the IPR application.
-  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.
-  Rebate on filing of application: Startups shall be provided an 80% rebate in filing  of  patents  vis-à-vis  other  companies. This will help  them pare costs in the crucial formative years.

The  scheme  was  launched  initially  on  a  pilot  basis  for  1  year;  based  on  the experience gained, further steps were taken.

## Progress

Startups  are  eligible  for  an  80%  rebate  in  patent  filing  fees  and  a  50%  rebate  in trademark filing fees. Additionally, Startups are also provided the facility of expedited examination of patent applications to reduce the time taken in granting patents. 211 patent facilitators  and  241  trademark  facilitators  have  been  empanelled  under  this scheme to provide free-of-charge services to Startups.

2,785  patent  applications  have  been  granted  80%  rebate  on  the  filing  fee.  5,494 trademark applications have been granted a 50% rebate on filing fee.

## 5. Relaxed Norms of Public Procurement for Startups Objective

To provide an equal platform to Startups (in the manufacturing sector) vis-à-vis the experienced entrepreneurs/ companies in public procurement

## Details

Typically, whenever a tender is floated by a Government entity or by a Public Sector Undertaking (PSU), very often the eligibility condition specifies either 'prior experience' or 'prior turnover'. Such a stipulation prohibits/ impedes Startups from participating in such tenders.

At present, effective April 1, 2015 Central Government, State Government and PSUs have  to  mandatorily  procure  at  least  20%  from  the  Micro  Small  and  Medium Enterprise (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. The Startups will also have to demonstrate requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India.

## Progress

The  requirement  of  prior  turnover  and  prior  experience  has  been  relaxed  to encourage startups to participate in tenders. Further, startups have been exempted from  the  requirement  of  earnest  money  deposit.  'GeM  Startup  Runway'  has  been launched  for  startups  to  sell  products  and  services  to  Government.  As  on  11 th February 2020, 4,210 DPIIT recognized startups have registered on Government eMarketplace (GeM). 21,323 orders have been placed to startups. The value of orders served by startups is to the tune of about Rs.800.15 crore.

Additionally, Startups can now register and participate in all public orders on Central Public  Procurement  Portal  and  get  exemptions  on  prior  experience,  prior  turnover and earnest money deposit requirements.

## 6. Faster Exit for Startups

## Objective

To make it easier for Startups to wind up operations

## Details

Given the innovative nature of Startups, a significant percentage fail to succeed. In the  event  of  a  business  failure,  it  is  critical  to  reallocate  capital  and  resources  to more  productive  avenues  and  accordingly  a  swift  and  simple  process  has  been proposed  for  Startups  to  wind-up  operations.  This  will  promote  entrepreneurs  to experiment  with  new  and  innovative  ideas,  without  having  the  fear  of  facing  a complex and long-drawn exit process where their capital remains interminably stuck.

The  Insolvency  and  Bankruptcy  Bill  2015  ('IBB'),  tabled  in  the  Lok  Sabha  in December  2015  has  provisions  for  the  fast  track  and  /  or  voluntary  closure  of businesses.

In  terms  of  the  IBB,  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. In such instances, an insolvency professional shall be appointed for the Startup, who shall be in charge of the company (the promoters and management shall no longer run the company) for liquidating its assets and paying its creditors within six months of such appointment. On appointment of the insolvency professional, the liquidator shall be responsible for the  swift  closure  of  the  business,  sale  of  assets  and  repayment  of  creditors  in accordance with the distribution waterfall set out in the IBB. This process will respect the concept of limited liability.

## Progress

Ministry of Corporate Affairs has notified Startups as 'Fast track firms' enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies

## 7. Funding Support through Fund of Funds Objective

To  provide  funding  support  for  development  and  growth  of  innovation  driven enterprises

## Details

One of key challenges faced by Startups in India has been access to finance. Often Startups,  due  to  lack  of  collaterals  or  existing  cash  flows,  fail  to  justify  the  loans. Besides, the high-risk nature of Startups wherein a significant percentage fail to takeoff, hampers their investment attractiveness.

In order to provide funding support to Startups, Government will set up a fund with an initial  corpus  of  Rs.  2,500  crore  and  a  total  corpus  of  Rs.  10,000  crore  over  a period 4 years (i.e. Rs. 2,500 crore per year). 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.

Key features of the Fund of Funds are highlighted below:

-  The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups
-  Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
-  The  Fund  of  Funds  shall  contribute  to  a  maximum  of  50%  of  the  stated daughter  fund  size.  In  order  to  be  able  to  receive  the  contribution,  the daughter fund  should  have  already  raised  the  balance  50%  or  more  of  the stated  fund  size  as  the  case  maybe.  The  Fund  of  Funds  shall  have representation on the governance structure/ board of the venture fund based on the contribution made.
-  The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.

## Progress

The  Fund  of  Funds  for  Startups  (FFS)  is  being  operated  and  managed  by  Small Industries Development Bank of India (SIDBI). FFS funds the Alternative Investment Funds  (AIFs)  which  in  turn  invest  twice  the  amount  contributed  by  the  FFS,  into DPIIT  recognized  startups.  As  of  18th  February  2020,  SIDBI  has  committed  Rs. 3123.20 Cr to 47 SEBI registered Alternative Investment Funds (AIFs). These funds have raised a corpus fund of Rs. 25,728 Cr.  Rs. 912.91 Cr. have been drawn from the FFS and Rs. 3,378.47 Cr. have been invested into 320 startups.

## 8. Credit Guarantee Fund for Startups Objective

To catalyse entrepreneurship by providing credit to innovators across all sections of society

## Details

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 Rs 500 crore per year for the next four years.

## Progress

The  earlier  Cabinet  Note  on  Credit  Guarantee  Scheme  for  Startups  has  been withdrawn.  DPIIT is under process of re-drafting the cabinet note keeping in view the suggestions of SIDBI.

## 9. Tax Exemption on Capital Gains

## Objective

To  promote  investments  into  startups  by  mobilizing  the  capital  gains  arising  from sale of capital assets.

## Details

-  Due to their high-risk nature, startups are not able to attract investment in their initial  stage.  It  is  therefore  important  that  suitable  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. This will augment the funds available to various VCs/AIFs for investment in startups.
-  In addition, existing capital gain tax exemption for investment in newly formed manufacturing  MSMEs  by  individuals  shall  be  extended  to  all  startups. Currently, such an entity needs to purchase 'new assets' with the capital gain received  to  avail  such  an  exemption.  Investment  in  'computer  or  computer software'  (as  used  in  core  business  activity)  shall  also  be  considered  as purchase of 'new assets' in order to promote technology driven Startups.

## Progress

Section 54EE and 54 GB have been inserted in the Income Tax Act, 1961 to provide exemption from capital gains tax.

## 10.  Tax Exemption to Startups for 3 years

## Objective

To promote the growth of Startups and address working capital requirements.

## Details

-  During  the  initial  years,  budding  entrepreneurs  struggle  to  evaluate  the feasibility  of  their  business  idea.  Significant  capital  investment  is  made  in embracing ever-changing technology, fighting rising competition and navigating through the unique challenges arising from their venture.
-  Also, there are limited alternative sources of finance available to the small and growing entrepreneurs, leading to constrained cash funds.
-  With  a  view  to  stimulate  the  development  of  startups  in  India  and  provide them  a  competitive  platform,  it  is  imperative  that  the  profits  of  startup initiatives are exempted from income-tax for a period of 3 years.
-  This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations. The exemption shall be available subject to non-distribution of dividend by the Startup.

## Progress

With  a  view  to  stimulate  the  development  of  Startups  in  India  and  provide them a competitive platform, the profits of eligible DPIIT recognized startups are  exempt  from  income-tax  for  a  block  of  3  years  out  of  10  years  since incorporation  under  Section  80IAC  of  the  Income  Tax  Act.  To  avail  these benefits, a Startup must get a Certificate of Eligibility from the Inter-Ministerial Board (IMB). 264 startups have been granted income tax exemptions.

## 11.  Tax Exemption on Investments above Fair Market Value

## Objective

To encourage seed-capital investment in Startups.

## Details

-  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.
-  In  the  context  of  Startups,  where  the  idea  is  at  a  conceptualization  or development stage, it is often difficult to determine the FMV of such shares.
-  In  majority  of  the  cases,  FMV  is  also  significantly  lower  than  the  value  at which the capital  investment  is  made.  This  results  into  the  tax  being  levied under section 56(2)(viib).
-  Currently, investment by venture capital funds in Startups is exempted from operations of this provision. The same shall be extended to investment made by incubators in the Startups.

## Progress

DPIIT recognized startups are exempt from tax under Section 56(2)(viib) of the Income Tax Act when such a Startup receives any consideration for issue of shares which exceeds the Fair Market Value of such shares. The startup has to file a duly signed declaration to DPIIT. 2,176 entities, have availed of this benefit as on 24th of February 2020.

## 12.  Organizing  Startup  Fests  for  Showcasing  Innovation  and  Providing  a Collaboration Platform

## Objective

To  galvanize  the  Startup  ecosystem  and  to  provide  national  and  international visibility to the Startup ecosystem in India

## Details

A pivotal component for growth of Startups is regular communication and collaboration  within  the  Startup  community,  both  national  as  well  international.  An effective Startup ecosystem can't be created by the Startups alone. It is dependent on active participation of academia, investors, industry and other stakeholders.

To bolster the Startup ecosystem in India, the Government is proposing to introduce Startup fests at national and international stages.

These fests would provide a platform to Startups in  India  to  showcase  their  ideas and  work  with  a  larger  audience  comprising  of  potential  investors,  mentors  and fellow Startups.

As part of 'Make in India' initiative, Government proposes to:

-  Hold one fest at the national level annually to enable all the  stakeholders of Startup ecosystem to come together on one platform.
-  Hold one fest at the international level annually in an international city known for its Startup ecosystem.

The fests shall have activities such as sessions to connect with investors, mentors, incubators and Startups, showcasing innovations, exhibitions and product launches, pitches by Startups, mentoring sessions, curated Startup walks, talks by disruptive innovators, competitions such as Hackathon, Makerspace, etc., announcements of rewards and recognitions, panels and conferences with industry leaders, etc.

## Progress

This  Department  has  organized  various  Startup  events.  Some  of such  key  events are as follows:

- I. Roundtable headed by Minister of Commerce and Industry with Venture Fund managers in April 2018 at Mumbai;
- II. Roundtable with Singapore delegation led by Enterprise Singapore & TiE Singapore in August 2018 at Delhi;
- III. Roundtable with Japanese startups led by JETRO in September 2018 at Delhi;
- IV. Roundtable headed by Secretary DPIIT with Venture Fund managers in August 2018 at Delhi;
- V. Roundtable with Finance Secretary on banking regulations faced by startups in September 2018 at Delhi;
- VI. Startup India Global Venture Capital Summit in December 2018 at Goa;
- VII. Roundtable headed by Secretary DPIIT on Angel Tax regulations in February 2019 at Delhi;
- VIII. Startup Manthan @ Aero India in February 2019 at Bengaluru;
- IX. Speed Mentoring Session for Women Entrepreneurs in March 2019 at Delhi;
- X. Roundtable headed by Secretary, DPIIT on Accreditation of investors in  April  2019 at Delhi;
- XI. Roundtable headed by Secretary DPIIT on Regulatory issues faced by stakeholders of startup ecosystem April 2019 at Delhi;
- XII. Roundtable with Central Government Departments on best practices for promoting startups in May 2019 at Delhi
- XIII. Roundtable headed by Secretary, DPIIT on journey and hurdles faced by Startups in November 2019 at Delhi
- XIV. Second edition of Startup India Global Venture Capital Summit in December 2019 at Goa;
- XV. Roundtable headed by Minister of Commerce and Industry to discuss regulatory concerns of investors in December 2019 at Goa
- XVI. Roundtable headed by Secretary DPIIT on Regulatory issues pertaining to Startups held in January 2020 at Delhi;
- XVII. Roundtable headed by Secretary DPIIT on mobilization of surplus funds available with pension, insurance and PSUs for investment into Startups in January 2020 at Delhi;

## 13.   Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program

## Objective

To  serve  as  a  platform  for  promotion  of  world-class  Innovation  Hubs,  Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas

## Details

The Atal Innovation Mission (AIM) shall have two core functions:

-  Entrepreneurship  promotion  through  Self-Employment  and  Talent  Utilization (SETU),  wherein  innovators  would  be  supported  and  mentored  to  become successful entrepreneurs
-  Innovation  promotion  to  provide  a  platform  where  innovative  ideas  are generated

The main components proposed to be undertaken as part of the mission include:

## Entrepreneurship promotion:

-  Establishment of sector specific incubators including in PPP mode.
-  Establishment of 500 Tinkering Labs.
-  Pre-incubation training to potential entrepreneurs in various technology areas in collaboration with various academic institutions having expertise in the field.
-  Strengthening of incubation facilities in existing incubators and mentoring of Startups.
-  Seed funding to potentially successful and high growth Startups.

## Innovation promotion:

- o Institution  of  Innovation  Awards  (3  per  state/UT)  and  3  National  level awards.
- o Providing support to State Innovation Councils for awareness creation and organizing state level workshops/conferences.
- o Launch of Grand Innovation Challenge Awards for finding ultra-low cost solutions to India's pressing and intractable problems.

## Progress

This initiative  is  coordinated  by  NITI  Aayog.  8,878 schools have been selected for establishing  tinkering  labs  and  Rs  12  Lakh  each  has  been  disbursed  to  4,020 tinkering labs. Rs. 482.40 Crore grant has been given to Atal Tinkering Labs. NITI has launched. Innovation Awards through the challenge route by the name of Atal New India Challenges (ANIC). Applications were called in 24 focus areas across 5 ministries.26 applicants have been shortlisted for funding and handholding support and additional 26 applicants are shortlisted for handholding support.

## 14. Harnessing Private Sector Expertise for Incubator Setup

## Objective

To ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public private partnership

## Details

India  currently  lacks  availability  of  incubation  facilities  across  various  parts  of  the country.  Incubation  facilities typically  include  physical  infrastructure,  provision  of mentorship support, access to networks, access to market, etc. Of all these features, physical  infrastructure  entails  large  capital  investments  which  can  generally  be facilitated by the Government. However, requisite skills for operating an incubator are pivotal  as  well,  for  which  expertise  of  the  private  sector  needs  to  be  leveraged. Considering this, Government shall encourage

- i. Setting up of 35 new incubators in existing institutions. Funding support of 40% (subject to a maximum  of  Rs.  10  crore)  shall be  provided by Central Government for establishment of new incubators for which 40% funding by the respective State Government and 20% funding by the private sector has been committed. The incubator shall be managed and operated by the private sector.
- ii. 35 new private sector incubators. A grant of 50% (subject to a maximum of Rs. 10 crore) shall be provided by Central Government for incubators established by private  sector  in  existing  institutions.  The  incubator  shall  be  managed  and operated by the private sector.
- iii. The funding for setting up of the incubators shall be provided by NITI Aayog as part  of  Atal  Innovation  Mission  (refer  #13  of  this  Action  Plan).  Participating departments and agencies for setting up of new incubators shall be Department of  Science  and  Technology,  Department  of  Biotechnology,  Department  of Electronics and Information Technology, Ministry of Micro, Small and Medium Enterprises,  Department  of  Higher  Education,  Department  of  Industrial  Policy and Promotion and NITI Aayog.

Each of the above-mentioned departments/agencies would enter into a standard MoU with identified private sector players for creation of academia-industry tie-ups for nurturing innovations in academic institutions

## Progress

Atal  Innovation  Mission  has  selected  102  incubators  across  the  country  to  provide financial support through grants in aid. 38 Atal Incubation Centers and 9 Established Incubation  Centers  are  operational  across  the  country.  Rs.  139.91  Cr  has  been disbursed  to  these  38  AICs  and  9  EICs.  More  than  620  Startups  incubated  in AICs/EICs  out  of  which  121  are  women-led  start-ups.  More  than  14,000  jobs  have been  created  and  more  than  150  MSME's  have  been  supported  to  build  business sustainability.  Additionally,  more  than  500  mentors  have  been  on-boarded  by  the AICs/EICs to guide the Startups.

## 15. Building Innovation Centres at National Institutes

## Objective

To propel successful innovation through augmentation of incubation and R&D efforts.

## Details

In order to augment the incubation and R&D efforts in the country, the Government will set  up/  scale  up  31  centres  (to  provide  facilities  for  over  1,200  new  Startups)  of innovation and entrepreneurship at national institutes, including:

Setting up 13 Startup centres: Annual funding support of Rs. 50 lakhs (shared 50:50 by Department of Science and Technology and Ministry of Human Resource Development)  shall  be  provided  for  three  years  for  encouraging  student  driven Startups from the host institute.

Setting-up/ Scaling-up 18 Technology Business Incubators (TBIs) at NITs/IITs/IIMs etc. as  per  funding  model  of  Department  of  Science  and  Technology  with  Ministry  of Human Resource Development providing smooth approvals for TBI to have separate society and built up space.

## Progress

This initiative is coordinated by Department of Science and Technology and Ministry of Human Resource Development. 11 TBIs (Technology Business Incubators) have been approved for which Rs 42.2 crore have been sanctioned and Rs 18.7 crore have been disbursed  to  TBIs.  15  Startup  Centres  have  been  approved  for  joint  set  up  by Department of Science and Technology and Ministry of Human Resource Development  and  an  amount  of  Rs  37.50  lakh  (Rs  3.75  lakh  each  for  10  Startup Centres)  has  been  released  for  10  Startup  Centres  by  Ministry  of  Human  Resource Development

## 16.  Setting up of 7 New Research Parks

## Objective

To propel successful innovation through incubation and joint  R&D efforts between academia and industry

## Details

The  Government  shall  set  up  7  new  Research  Parks  in  institutes  such  as  IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Kharagpur, IISc Bangalore, IIT Gandhinagar  and  IIT  Delhi  with  an  initial  investment  of  Rs.  100  crore  each.  The Research Parks shall be modelled based on the Research Park setup at IIT Madras.

-  The  IIT  Madras  Research  Park  endeavors  to  enable  companies  with  a research focus to set up a base in the Park and leverage the expertise of IIT Madras. The Research Park breaks down the traditional, artificial barriers of innovation  through  its  connectivity  and  collaborative  interaction.  This  helps industry  to  create,  integrate  and  apply  advancements  in  knowledge.  It

leverages  best  practices  from  successful  Research  Parks  such  as  those  at Stanford, MIT and Cambridge.

The guiding principles behind the park include:

-  Creating a collaborative environment between industry and academia through joint research projects and consulting assignments.
-  Creating a self-sustaining and technologically fertile environment.
-  Encouraging  and  enabling  R&D  activities  and  Startups  that  are  aligned  to potential needs of the industry
-  Providing world class infrastructure for R&D activities and incubation.
-  Enabling development of high-quality personnel and motivating professional growth  for  researchers  in  companies  through  part  time  master's  and  PhD Programs.

## Progress

This  initiative  is  coordinated  by  Department  of  Science  and  Technology  and Ministry  of  Human  Resource  Development. 8  new  Research  Parks have been identified to be built over 5 years at 7 IITs and IISc Bangalore. Government has sanctioned total funding of Rs 680 crore towards development of these research parks with over Rs. 233 crore being disbursed so far.

## 17.   Promoting Startups in the Biotechnology Sector

## Objective

To foster and facilitate bio-entrepreneurship

## Details

The Biotechnology sector in India is on a strong, growth trajectory. Department of Biotechnology  endeavors  to  scale  up  the  number  of  Startups  in  the  sector  by nurturing  approximately  300-500  new  Startups  each  year  to  have  around  2,000 Startups  by  2020.  In  order  to  promote  Startups  in  the  sector,  The  Department  of Biotechnology  shall  be  implementing  the  following  measures  along  with  its  Public Sector  Undertaking  Biotechnology  Research  Assistance  Council  (BIRAC):  Bioincubators, Seed Fund and Equity Funding:

-  5  new  Bio-clusters,  50  new  Bio-Incubators,  150  technology  transfer  offices and  20  Bio-Connect  offices will be set up in research institutes  and universities across India.
-  Biotech  Equity  Fund  -  BIRAC  AcE  Fund  in  partnership  with  National  and Global Equity Funds (Bharat Fund, India Aspiration Fund amongst others) will provide financial assistance to young Biotech Startups.

## Encouraging and leveraging global partnerships:

-  Bengaluru-Boston Biotech Gateway to India has been formed. Letter of Intent has been signed between Department of Biotechnology, Government of India and Department of Information Technology, Government of Karnataka for the same. Through this initiative,  a  range  of  institutes  in  Boston  (Harvard/  MIT) and  Bengaluru  will  be  able  to  connect  to  share  ideas  and  mentor  the

entrepreneurs  especially  in  the  areas  of  Genomics,  Computational  Biology, Drug Discovery and new vaccines.

-  Amplification of Bio-entrepreneurship through BIRAC Regional Entrepreneurship Centres (BREC). The BREC aims to impart bioentrepreneurs with the necessary knowledge and skills required for converting innovative ideas into successful ventures. Department of Biotechnology shall set up 5 Regional centres or Mini-BIRACs in the next 5 years.

## Progress

Four  bio-clusters  at  Kalyani,  Bangalore,  Faridabad,  and  Pune  are  operational.  Rs 401 crore have been sanctioned, and Rs 300 crore has been disbursed to these bioclusters.  In  2019,  EFC  has  been  approved  for  the  establishment  of  10  URJIT clusters- University Research Joint Industry Translational Cluster. As per this model, the universities in the region would become central part of the cluster approach. 41 bio-incubators have been supported and all of them are operational. Rs 272.26 crore have been sanctioned and Rs 193.88 crore have already been disbursed. Five bioconnect offices have been established as following:

1. CCAMP, Bengaluru with California Institute for Quantitative Biosciences (QB3)
2. CCAMP-  Sister  Innovation  HUB  with  Roslin  Innovation  Centre,  University ofEdinburgh, UK
3. CEIIC BioNEST with European Union
4. KIIT  BioNEST  -  with  TECHNOPORT  SA  -  BELVAL  Business  Incubator, Luxembourg
5. KIIT BioNEST - with Start-Life Centre, Wageningen University Netherland

The target for 2020 - 2021 is to set up 8 additional Bio-connect offices. Four BIRAC Regional Centres have already been set up at Hyderabad, Bengaluru, Bhubaneswar, and Pune. For this, Rs 16.95 crore have been sanctioned and Rs 9.42 crore have been disbursed.

The Funds are disbursed to Bio-Incubators, under BIRAC Seed Fund, who in turn provide seed funding to their incubatees. So far, Rs 150 crore has been committed to  Alternate  Investment  Funds  (AIFs)  and  Rs  25.1  crore  has  been  disbursed. BIRAC's SEED Fund with 14 Bio-incubators as Seed fund partners are operational, Rs 26 Crores have been sanctioned for BIRAC SEED Fund and INR 18.3 Cr has been disbursed.

## 18.  Innovation Focused Programs for Students

## Objective

To  foster  a  culture  of  innovation  in  the  field  of  Science  and  Technology  amongst students

## Details

In order to promote research and innovation among young students, the Government shall implement the following measures:

-  Innovation Core. Innovation Core program shall be initiated to target school kids  with  an  outreach to  10  lakh  innovations  from 5  lakh  schools. One  lakh

innovation  would  be  targeted,  and  the  top  10,000  innovations  would  be provided  prototyping  support.  Of  these  10,000  innovations,  the  best  100 would be shortlisted and showcased at the Annual Festival of Innovations in the Rashtrapati Bhavan.

-  NIDHI:  A  Grand  Challenge  program  ('National  Initiative  for  Developing  and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award Rs. 10 lakhs to 20 student innovations from IEDCs.
-  Uchhattar Avishkar Yojana: A joint MHRD-DST scheme which has earmarked Rs.  250  crore  per  annum  towards  fostering  'very  high  quality'  research amongst  IIT  students.  The  funding  towards  this  research  will  be  50% contribution  from  Ministry  of  Human  Resource  Development,  25%  from Department of Science and Technology and 25% from industry. This format has  been  devised  to  ensure  that  the  research  and  funding  gets  utilized bearing in mind its relevance to the industry. Each project may amount to Rs5 crore only. This scheme will initially apply to IITs only.

## Progress

This initiative is coordinated by Department of Science and Technology and Ministry of Human Resource Development.

224 applications were received under NIDHI (National Initiative for Developing and Harnessing  Innovations).Out  of  30  finalists  selected,  12  student  run  teams  were awarded Rs 10 Lakh each. 148 projects have been sanctioned and Rs 220.75 crore has been released under the UchchatarAvishkarYojana scheme. Rs10,000 has been granted to  1,03,497  students  in  the  last  3  years  under  the  MANAK  (Million  Minds Augmenting National Aspiration and knowledge) Scheme.

## 19.   Annual Incubator Grand Challenge

## Objective

To support creation of successful world class incubators in India

## Details

For a new idea to become a successful commercial venture, adequate support and mentoring at various stages of the business lifecycle is required. Incubators play an important role in identifying early stage Startups and supporting them across various phases  of  their  lifecycle.  In  order  to  build  an  effective  Startup  ecosystem,  it  is imperative that world class incubators, adopting leading industry practices, are setup in the country.

The Government is proposing to make forward looking investments towards building world class incubators. In its first phase, the aim is to establish 10 such incubators. To enable this, Government of India shall identify and select 10 incubators who have the potential to become world class. These incubators would be given Rs. 10 crore each as financial assistance which may be used for ramping up the quality of service offerings.  The  incubators  shall  also  become  reference models for other incubators aspiring to offer best-in-class services. Video interviews of these incubators would be showcased on the Startup India portal.

An  'Incubator  Grand  Challenge'  exercise  shall  be  carried  out  for  identification  of these incubators. The exercise shall entail: · Open invitation of applications from incubators · Screening and evaluation based on pre-defined Key Performance Indicators (KPIs)

The Incubator Grand Challenge shall be an annual exercise

## Progress

This activity is being coordinated by NITI Aayog.

## ********

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (d)  TO  (g)  OF  THE  LOK SABHA UNSTARRED QUESTION 2166 FOR ANSWER ON 4 TH  MARCH, 2020.

## 1. Regulatory Easing

Recognizing that disruptive business models and innovative technologies may face  regulatory  hurdles,  DPIIT  has  held  extensive  consultations  with  all  the stakeholders  and  has  worked  with  relevant  Government  Agencies  to  make regulatory  changes. 35  such  regulatory  changes,  to  enhance  ease  of  doing business,  ease  raising  capital  and  reduce  compliance  burden  have  been undertaken. The list of regulatory reforms is enclosed at Annexure - A

## 2. Participation of States in Strengthening Startup Ecosystems

DPIIT is engaging intensively with the State Governments to develop strong Startup ecosystems across the country.

State/UT Startup  Ranking  Framework  was  launched on  6 th February, 2018.The key objective of the Startup States Ranking Framework 2018 (SRF2018)  was  to  encourage  States  and  UTs  to  take  proactive  steps  towards strengthening the Startup ecosystem within their jurisdiction. There were 38 action  points  categorized  into  7  broad  areas  such  as  Startup  Policy  and Implementation, Incubation support,  Seed  Funding,  Angel  and  Venture Funding, Simplification of Regulations,  Easing  Public  Procurement  and Awareness & Outreach. The ranking methodology aims to create a healthy competition among States to further learn, share and adopt best practices. A compendium of good practices was also launched, listing 95 good practices implemented  by  various  State  Governments.  Knowledge  Workshops  were held  to  assist  States  in  formulating  policies  and  executing  appropriate programs.  Visits  to  USA  and  Israeli  ecosystems  were  facilitated  for  State Government  representatives to enable the transfer of information and knowledge from the best ecosystems of the world. The final rankings of SRF 2018  were  announced  on  20th  December,  2018  and  the  States  were felicitated  by  DPIIT.  27  States  and  3  Union  Territories  participated  in  the exhaustive ranking exercise.

As a result of SRF 2018, new Startup policies were launched, old and archaic laws were abolished, new Government orders were issued and many Startups were supported .Some of the  major impacts of the ranking exercise include Implementation of Startup Policies in 25 States, Seed Funding to 3213 Startups; Funding  of 163  Startups through Venture Funds;  17 States announcing incentives for women entrepreneurs; Incubation area of 10.2 lakh Sq.ft supported by State Governments; Establishment of 596 Entrepreneurship  Cells  across  340  districts;  Registration  of  1996  mentors across 19 States and organization of 233 Startup events across 21 States.

DPIIT has launched States' Startup Ranking Framework for 2019 with the  key  objective  of  encouraging  States  and  Union  Territories  to  take proactive  steps  towards  strengthening  the  Startup  ecosystems  within  their respective  jurisdiction.  Details  of  the  Framework  have  already  been  shared with all the State Governments. The framework would evaluate the progress from 1 st May, 2018 to 30 th September, 2019. Feedback and evaluation exercise is underway.

## 3 Startup Yatra

DPIIT has also made efforts to engage with the Startup ecosystem through extensive  outreach  via  bootcamps,  social  media,  print  and  digital  platforms. The Startup India Yatra is an initiative that travels to Tier 2 and Tier 3 cities of India to search for entrepreneurial talent and help develop Startup ecosystem. Day  long  bootcamps  are  conducted  which  include  awareness  workshops, idea  validation  and  pitching  sessions.  Startup  Yatra  has  been  conducted across 23 States in 207 districts impacting 78346 aspiring entrepreneurs. A total of 1,424 incubation offers have been given to the startups as a result of this initiative.

## 4 Grand Challenges

DPIIT has engaged with various Government Departments and assisted them in launching Startup challenges in various sectors and domains.

DPIIT launched the Ease of Doing Business (EoDB) Grand Challenge inviting  innovative  ideas  from  individuals,  startups  or  other  enterprises  to implement  Artificial  Intelligence  (AI),  Big  Data  Analytics,  Internet  of  Things (IoT),  Blockchain  and  other  cutting-edge  technologies,  for  re-engineering related  Government  processes.789  startups  application  received  through Startup India website were screened and winners have been announced for problem statements.

Under the Swachh Bharat Grand Challenge, Startup India worked with Ministry  of  Water  and  Sanitation  to  recognise  Startups  spearheading  novel innovations in the field of waste management, water management, air quality management and sanitation. The initiative has helped the Ministry to identify relevant  solutions  for  environmental  challenges.  Two  startups  under  each sector, have been awarded cash grants.

DPIIT  in  collaboration  with  Ministry  of  Agriculture  has  launched  an Agriculture  Grand  Challenge  inviting  solutions  on  12  problem  statements. Winners of the challenge have received mentorship, free of cost incubation for a  period  of  3  months,  opportunities  to  conduct  pilot  programs  and  funding support in the form of grants.

Apart  from  channelizing  resources  from  the  Government,  Market opportunities  and  mentorship  have  been  provided  by  way  of  organizing Corporate Grand Challenges in partnership with Softbank, Whatsapp, Western Digital, International Accelerator etc.

## 5 International Bilateral Cooperation

One of the key objectives under the Startup India initiative is to help connect Indian  Startup  ecosystems  to  global  Startup  ecosystems  through  various engagement models. International bilateral cooperation with countries having strong  Startup  ecosystems,  e.g.,  Israel,  Singapore,  Portugal  and  Sweden, have been entered into by Startup India Hub to facilitate market access and promote investments.

## 6 Encouraging Women Entrepreneurship

To  promote  women  entrepreneurship,  SIDBI  has  been  directed  to  reserve 10% of the Fund of Funds for women led startups. Further, all the Alternative Investment Funds (AIFs) where SIDBI takes equity have been mandated to contribute  20%  in  businesses  which  are  women  led,  women  influenced  or women employment or women consumption centric.

It  has  been decided that in all programs organized by DPIIT, at least one third of beneficiaries shall be women. Efforts are being made to see that other  Central  Government  Departments  and  State  Governments  having specific  schemes for  start-ups  and  entrepreneurs  shall  reserve  at  least  one third  of  the  benefits for  women. To  promote flow of both equity and debt to women led startups, interactions of such women entrepreneurs with venture funds supported by SIDBI and lending institutions including banks are being organized  by  inviting  applications  on  the  'Startup  India  Hub'  and  inviting selected  women  entrepreneurs,  after  a  process  of  screening  by  experts,  to interact  with  these  institutions  for  both  equity/debt  funding.  Specific  and suitable  entrepreneurship  development  programmes for women led startups throughout the country are being designed by ascertaining the training/skilling needs of the target groups. To meet the advisory needs of the start-ups led by women, legal, tax, financial and other service providers are being sought to get them connected with each other through the Startup India Hub.

*******

## Regulatory Reforms For Enabling Small Businesses or Startups (Since January, 2016)

## Reserve Bank of India

1.  Startup  enterprises  permitted  to  access  loans  under  External  Commercial Borrowing Framework up to USD 3 million.(Oct, 2016)
2.  A Securities and Exchange Board of India (SEBI) registered Foreign Venture Capital Investor (FVCI) may contribute up to 100%of the capital of an Indian company engaged in any activity mentioned in Schedule 6 of Notification No. FEMA  20/2000,  including  startups  irrespective  of  the  sector  in  which  it  is engaged, under the automatic route. (Aug, 2017)
3.  An Indian startup having an overseas subsidiary, may open a foreign currency account  with  a  bank  outside  India  for  the  purpose  of  crediting  to  it  foreign exchange earnings out of exports/ sales made by the said entity and/ or the receivables,  arising  out  of  exports/  sales,  of  its  overseas  subsidiary.  (June, 2016)
4.  SOFTEX form filed by software exporters moved online. (Feb, 2019)

## Securities and Exchange Board of India (SEBI)

5.  Lock in period for investments made by an Angel Fund reduced to 1 year from 3 years as amended by the SEBI (Alternative Investment Funds) (Amendment) Regulations,2016, w.e.f. 04-01-2017.
6.  Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs as provided by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, w.e.f. 04-01-2017.
7.  The upper limit for number of angel investors in a scheme is increased from forty nine to two hundred as amended by SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016,w.e.f. 04-01-2017
8.  The requirements of minimum investment amount by an Angel Fund in any venture capital undertaking is reduced from fifty lakhs to twenty five lakhs as amended by SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016,w.e.f. 04-01-2017
9.  'Operating Guidelines for Alternative Investment Funds  in International Financial Services Centres' issued by SEBI. (Nov, 2018)

## Ministry of Corporate Affairs

10.  The  financial  statement,  with  respect  to  private  company  (if  such  private company is a start-up) may not include the cash flow statement. (June, 2017)
11.  A private company, which is considered as a start-up for a period of five years from  the  date  of  its  incorporation,  is  also  allowed  to  accept  deposits  from members without any restriction on the amount. (Sep, 2017)
12.  Startup defined for the purpose of Companies Act, 2013: As per the definition, a  start-up  company  means  a  private  company  incorporated  under  the Companies Act, 2013 and recognised as a 'start-up' in accordance with the notification  issued  by  the  Department for Promotion  of  Industry  and  Internal Trade. (June, 2017)
13.  Exemption from procedural compliance (e.g. such as issue of an offer circular or creation of a deposit repayment  reserve)  for  raising deposits  from shareholders. (June, 2017)
14.  In  relation  to  a  private  company  (if  such  private  company  is  a  startup),  the annual return shall be signed by the Company Secretary, or where there is no Company Secretary, by the Director of the company. (June, 2017)
15.  A  private  company  (if  such  private  company  is  a  startup)  is  required  to conduct  at  least  one  meeting  of  the  Board  of  Directors    in  each  half  of  a calendar year and the gap between the two meetings is not less than ninety days. (June, 2017)
16.  Name Reservation for Company incorporation: Rule 8, Companies (Incorporation)  Rules,  2014  substituted  with  Companies  (Incorporation)  5th Amendment Rules, 2019,which provides for new regulations on resemblance with  an  existing  company  name,  new categories of undesirable names of a company and list of words which can be used only after obtaining approval. (May, 2019)
17.  Amendment in Companies (Share Capital and Debentures) Rules, 2014: The Ministry  of  Corporate  Affairs  issued  a  notification  on  16th  August,  2019 increasing  the  period  in  which  ESOPs  could  be  granted  to  promoters  and directors (holding more than 10% equity) of Startups, from 5 years to 10 years from  the  date  of  incorporation  and  thereby  aligned  the  provisions  of  the Companies (Share Capital and Debentures) Rules with the provisions referred to in the DPIIT notification dated 19 th Feb, 2019.

The  notification  also  enhanced  the  limit  on  shares  with  Differential  Voting Rights in the Company from 26% of the total post-issue paid up equity capital of the Company to 74% of the total voting power. Further, the condition for the company to  have  consistent  track  record  of  distributable  profits  for  the  last three years for issue of DVR shares has been removed. (August 2019)

18.  Corporate  Social  Responsibility  Funds:  In  reference  to  section  135  of  the Companies Act 2013, Schedule VII has been amended to include Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government  or State Government,  and contributions to public funded Universities,  Indian  Institute  of  Technology  (IITs),  National  Laboratories  and Autonomous  Bodies  (established  under  the  auspices  of  Indian  Council  of Agricultural  Research  (ICAR),  Indian  Council  of  Medical  Research  (ICMR), Council  of  Scientific  and  Industrial  Research  (CSIR),  Department  of  Atomic Energy  (DAE),  Defence  Research  and  Development  Organisation  (DRDO), Department  of  Science  and  Technology  (DST),  Ministry  of  Electronics  and Information Technology) engaged in conducting research in science, technology, engineering and  medicine aimed  at promoting Sustainable Development Goals (SDGs). (October 2019)

## Ministry of Finance, Department of Revenue

19.  In  the  case  of  a  domestic  company,  where  its  total  turnover  or  the  gross receipt  in  the  previous  year  does  not  exceed  two  hundred  and  fifty  crore rupees,  income  tax  shall  be  charged  at  the  rate  of  25  percent  of  the  total income. (Feb, 2018)
20.  Definition  of  eligible  business  as  stated  in  Section  80-IAC  aligned  with Startups definition. (April, 2018)
21.  Introduction of Section 54EE in the Income Tax Act, 1961: Exemption from tax on long-term capital gain if such long-term capital gain is invested in a fund

notified by Central Government. The maximum amount that can be invested is Rs 50 lakh. (May, 2016)

22.  Amendment  in  Section  54GB  of  Income  Tax  Act:  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  prescribed  stake  of equity shares of eligible Startup for utilizing the same for purchase of specified asset. (Feb, 2016)
23.  Minimum  Alternate  Tax  credit  allowed  to  be  carried  forward  up  to  fifteenth assessment years instead of ten assessment years. (2017)
24.  Exemption  under  section  80-IAC  of  Income  Tax  Act:  Exemption  to  eligible Startup  for  any  3  consecutive  assessment  years  out  of  7  years  (earlier  5 years) beginning from the year in which such eligible Startup is incorporated.(April, 2018)
25.  Exemption from tax under the provisions of section 56(2)(viib) to Startups for issue of shares above fair market value on the basis of a self-declaration to the  Central  Board of Direct  Taxes. The aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue should not exceed Rs. 25 Crore (Feb, 2019)
26.  Taxation of convertible notes -Period for which a bond, debenture, debenture-stock  or  deposit  certificate  was  held  prior  to  conversion  shall  be considered for determining the period of holding of such shares or debentures acquired upon conversion. (March, 2016)
27.  Amendment in Section 54GB of Income Tax Act w.e.f 1 st April 2020: (August 2019)
- i. The  condition  of  minimum  holding  of  50%  of  share  capital  or  voting rights in the start-up relaxed to 25%
- ii. Extension of period under which benefit under section 54GB from for sale of residential property can be availed up to 31st March, 2021
- iii. Condition restricting transfer of new asset being computer or computer software is to relaxed from 5 years to 3 years w.e.f. 1-4-2020
28.  Amendment in Section 79 of Income Tax Act (August 2019): Eligible Startups to carry forward their losses on satisfaction of any one of the two conditions:
- i. Continuity of 51% shareholding/voting power or
- ii. Continuity of 100% of original shareholders carrying voting power
29.  Pass through of losses allowed to Investment Funds i.e. Category I and II AIF similar to pass through of income. These amendments will take effect from the 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years (August 2019)
30.  The investment made by Venture Capital Fund of Category-I AIF in a startup was exempted from the applicability of the provisions of section 56(2)(viib) of the  IT  Act.  This  exemption  has  been  extended  to  all  sub-categories  of Category-I AIF and Category-II AIF via introduction of 'specified funds' in the said section (August 2019)
31.  The Finance Bill 2020 seeks to amend section 80-IAC of the Income-tax Act relating to special provision in respect of specified business. The provisions of section  80-IAC,  inter  alia,  provide  for  a  deduction  of  an  amount  equal  to hundred per cent. of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of ten years vis-à-vis the earlier norm of seven years at the option of the assessee and the total  turnover  of  its  business  does  not  exceed  hundred  crore  rupees  in  the previous year relevant to the assessment year for which deduction under this section is claimed. This amendment will take effect from 1st April, 2021 and will,  accordingly,  apply  in  relation  to  the  assessment  year  2021-2022  and subsequent assessment years. (Feb 2020)
32.  The Finance Bill 2020 seeks to amend section 80-IAC of the Income-tax Act relating to special provision in respect of specified business. The provisions of section  80-IAC,  inter  alia,  provide  for  a  deduction  of  an  amount  equal  to hundred per cent. of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of ten years at the  option  of  the  assessee  and  the  total  turnover  of  its  business  does  not exceed hundred crore rupees vis-à-vis  the  earlier  norm  of  twenty-five  crore rupees  in  the  previous  year  relevant  to  the  assessment  year  for  which deduction under this section is claimed. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years. (Feb 2020)
33.  The  Finance  Bill  2020  seeks  to  amend  Sections  156,  191  and  192  of  the Income  Tax  Act  to  enable  employees  receiving  specified  security  or  sweat equity  share  as  perquisite  under  section  17(2)(vi)  of  an  eligible  startup referred to in section 80-IAC, to deduct or pay, as the case may be, tax on such income within fourteen days after the expiry of forty-eight months from the end of the relevant assessment year; or from the date of the sale of such specified security or sweat equity share by the assessee; or from the date of the assessee ceasing to be the employee of the person, whichever is earlier, on the basis of rates in force of the financial year in which the said specified security or sweat equity share is allotted or transferred. This amendment will take effect from 1st April, 2020. As per the earlier norms, the said perquisite including  ESOPs  were  taxed  in  the  hands  of  the  employee  at  the  time  of exercise of the option.

## Ministry of Electronics and Information Technology

34.  Removal  of  clause  from  Electronic  Development  Fund  (EDF)  operating guidelines stating that if a fund draws from Fund of Funds for Startups, then they cannot draw from EDF and vice versa. (Nov, 2018)

## Ministry of Commerce and Industry, Department for Promotion of Industry and Internal Trade

35.  Amendment in the definition of a Startup: An entity shall be considered as a Startup upto a period of ten years from the date of incorporation/ registration and turnover of  the entity  for  any  of  the  financial  years  since  incorporation/ registration has not exceeded one hundred crore rupees. (Feb, 2019)

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