Lok Sabha Question No. 2614 (UNSTARRED), answered on 2021-03-10
Subject: Registration of Startups
Ministry: COMMERCE AND INDUSTRY
Asked by: L.S. Tejasvi Surya

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

## LOK SABHA

UNSTARRED QUESTION NO. 2614. TO BE ANSWERED ON WEDNESDAY, THE 10 TH  MARCH, 2021.

## REGISTRATION OF STARTUPS

## 2614.  SHRI L.S. TEJASVI SURYA:

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

वाणिज्य

## एवं उद्योग मंत्री

- (a) the number of startups registered under the Government State-wise and yearwise since 2014;
- (b) the details  of  the  benefits  available  to  startups  from  the  Government, introduced through the Startup India programme and Atmanirbhar package;
- (c) the details on the abolition of angel tax and the intended benefit to startups; and
- (d) whether  the  Government  is  considering  any  more  incentives  for  helping startups to flourish as well as for establishment of startups which are in the pipeline and if so, the details thereof?

## ANSWER

## वाणिज्य  एवं उद्योग मंत्रालय में राज्य मंत्री (श्री सोम प्रकाश) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI SOM PARKASH)

- (a): Startup India is a flagship  initiative  of  the  Government  of India  launched  on 16th  January  2016.  The  initiative  aims  at  fostering  entrepreneurship  and promoting innovation by creating an ecosystem that is conducive to growth of Startups. Since, the launch of Startup India initiative, a total of 44,534 Startups has  been  recognized  by  DPIIT  as  on  24th  February  2021.  The  States/UTs wise breakup of DPIIT recognized startups is at Annexure-I .
- (b): The recognized startups are eligible for  a  number  of  benefits  under  Startup India  initiative  which  are  mentioned  at Annexure-II .  Further,  the  benefits  to start-ups under Atmanirbhar Bharat are at Annexure-III .
- (c): Startups are exempted from taxation as per provision of Section 56, (2) (vii b) of  Income  Tax  Act  1961.  A  notification  no.  G.S.R.  127(E),  dated  19th February, 2019 was issued by DPIIT prescribes the condition for exemption from taxation under Section 56, (2) (vii b) of IT Act 1961. The notification is attached at Annexure-IV .
- (d): Startup India Seed Fund Scheme is under implementation. Government has approved  the  scheme  with  an  outlay  of  INR  945  Crore  to  provide  financial assistance to startups for Proof of Concept, prototype development, product trials, market entry, and commercialization. It will support an estimated no. of 3,600 entrepreneurs through 300 incubators in the next 4 years. The scheme has been notified on 28 January 2021 and is attached at Annexure-V .

*******

## ANNEXURE-I

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (a)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO. 2614 FOR ANSWER ON 10.03.2021.

## The States/UTs wise breakup of DPIIT recognized startups

| States                                   | 2016   | 2017   | 2018   | 2019   | 2020   | 2021   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|
| Maharashtra                              | 93     | 1091   | 1650   | 2179   | 2722   | 592    |
| Karnataka                                | 67     | 880    | 1208   | 1707   | 1761   | 356    |
| Delhi                                    | 74     | 738    | 1185   | 1417   | 1801   | 342    |
| Uttar Pradesh                            | 29     | 410    | 788    | 896    | 1391   | 343    |
| Gujarat                                  | 29     | 296    | 451    | 629    | 883    | 298    |
| Haryana                                  | 28     | 267    | 486    | 720    | 817    | 157    |
| Telangana                                | 20     | 322    | 507    | 610    | 814    | 183    |
| Tamil Nadu                               | 54     | 268    | 459    | 621    | 767    | 160    |
| Kerala                                   | 24     | 169    | 331    | 664    | 706    | 146    |
| Rajasthan                                | 14     | 139    | 245    | 354    | 503    | 89     |
| West Bengal                              | 8      | 177    | 275    | 314    | 404    | 94     |
| Madhya Pradesh                           | 7      | 106    | 297    | 335    | 428    | 85     |
| Odisha                                   | 4      | 115    | 168    | 185    | 279    | 59     |
| Andhra Pradesh                           | 4      | 101    | 161    | 178    | 234    | 39     |
| Bihar                                    | 1      | 48     | 147    | 155    | 265    | 77     |
| Chhattisgarh                             | 11     | 57     | 121    | 162    | 155    | 22     |
| Jharkhand                                | 2      | 35     | 88     | 89     | 165    | 28     |
| Punjab                                   | 7      | 30     | 68     | 95     | 146    | 44     |
| Uttarakhand                              | 4      | 45     | 69     | 97     | 114    | 24     |
| Assam                                    | 10     | 35     | 68     | 67     | 119    | 25     |
| Jammu and Kashmir                        | 2      | 15     | 47     | 38     | 64     | 25     |
| Goa                                      | 2      | 19     | 44     | 41     | 67     | 11     |
| Chandigarh                               | 9      | 22     | 27     | 40     | 56     | 12     |
| Himachal Pradesh                         |        | 9      | 16     | 29     | 41     | 9      |
| Puducherry                               |        | 3      | 16     | 10     | 14     | 1      |
| Manipur                                  |        | 4      | 7      | 6      | 12     | 12     |
| Tripura                                  |        |        | 4      | 7      | 23     |        |
| Andaman and Nicobar Islands              |        | 1      | 2      | 8      | 5      |        |
| Nagaland                                 | 1      | 4      | 2      | 2      | 5      | 2      |
| Dadra and Nagar Haveli and Daman and Diu |        | 4      | 1      | 3      | 5      |        |
| Meghalaya                                |        |        | 2      | 5      |        | 2      |
| Arunachal Pradesh                        |        |        | 2      | 2      |        |        |
| Mizoram                                  |        |        | 2      | 1      | 1      |        |
| Sikkim                                   |        | 1      |        | 2      | 1      |        |
| Ladakh                                   |        |        |        |        | 1      |        |
| Lakshadweep                              |        |        |        |        | 1      |        |
| Total                                    | 504    | 5411   | 8944   | 11668  | 14770  | 3237   |

******

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (b)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO. 2614 FOR ANSWER ON 10.03.2021.

## Benefits available to Startups under Startup India Initiative

## 1.  Intellectual Property Rights (IPR) benefits:

- 1.1   Startups are eligible for 80% rebate in patent filing fees and 50% on  trademark  filing  fees. Additionally,  Startups  are  also  provided the  facility  of  expedited  examination  of  patent  applications  to reduce the time taken in granting patents.
- 1.2   510  patent  facilitators  and  392  trademark  facilitators  have  been empanelled, as of November 2020, under this scheme to provide free-of-charge services to Startups.
- i. Till date 5253 applications for patents have been filed by startups  under  the  SIPP  Scheme,  out  of  which  514 patents have been granted.
- ii. Till November 2020, total number of Trademark applications filed - 12,264.

## 2.  Easing Public Procurement

- 2.1   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.
- 2.2   'GeMStartup  Runway'  has  been  launched  for  startups  to  sell products  and  services  to  Government.  As  of  4th  January  2021, 7,929 DPIIT recognized startups have registered on Government eMarketplace (GeM).
- 2.3   As  of  4th  January  2021,  53,226  orders  from  public  entities  have been placed to startups with the value of orders worth Rs. 2,279 crores.
- 2.4   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.
- 2.5   GeM has relaxed the requirement of approved Trademark certificate for DPIIT Recognized  Startups. An application for trademark will be sufficient.

## 3.  Self-Certification under Labour and Environmental laws

- 3.1     Startups recognised under Startup India initiative can self-certify their  compliance  against  the  6  labour  laws  and  3  environmental laws.
- 3.2     27  states  and  UTs  have  implemented  the  process  of  selfcertification  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 ShramSuvidha Portal. Overall, 169 DPIIT recognized Startups have availed the benefits of self-certification.

## 4.  Tax Exemption to Startups for 3 years

- 4.1     The provisions of section 80-IAC of the Income Tax Act provide for a deduction of an amount equal to 100% of the profits and gains derived  from  an  eligible  business  by  an  eligible  start-up  for  3 consecutive assessment years out of 7 years, at the option of the assessee,  subject  to  certain  conditions.  The  Finance  Act,  2020 provides for  an  amendment to  section  80-IAC  of the  Income Tax Act so as to provide that the deduction under the said section 80IAC  shall  be  available  to  an  eligible  start-up  for  a  period  of  3 consecutive assessment years out of 10 years beginning from the year  in  which  it  is  incorporated.  This  amendment  will  take  effect from  1st  April  2021  and  will,  accordingly,  apply  in  relation  to  the assessment year 2021-22 and subsequent assessment years.
- 4.2     To  avail  these  benefits,  a  Startup  must  get  a  Certificate  of Eligibility from the Inter-Ministerial Board (IMB). 339 startups have been granted income tax exemptions till January 2021.

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

- 5.1     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 in Form 2 to DPIIT {as per notification G.S.R. 127 (E)} to claim the exemption from the provisions of Section 56(2) (viib) of the  Income  Tax  Act.  As  of  2 nd March  2021,  with  regard  to declarations received from entities, furnished in Form 2, intimation regarding receipt of declaration in Form 2 has been mailed in the cases of 3772 entities.

## 6.   Faster Exit for Startups

- 6.1     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.  Fund of Funds for Startups
- 7.1     Fund of Funds for Startups (FFS) with a total corpus of Rs 10,000 crore  was established  with contribution spread over the 14th and 15th Finance Commission cycle based on progress of implementation.  Startup  Fund  of  Funds  is  operational  and  is managed by SIDBI.
- 7.2   As  of  1st  December  2020,  an  amount  Rs.1322.05  cr  stands released to SIDBI, out of which Rs.500cr was released in 2015-16; Rs.100 cr was released in 2016-17; Rs.431.30 cr released in 201920 and Rs.290.75 cr was released in 2020-21.
- 7.3   As of 1st December 2020, SIDBI has committed Rs. 4326.95 Cr to 60  SEBI  registered  Alternative  Investment  Funds  (AIFs).  These funds have raised a corpus fund of Rs. 31,598 Cr.  Rs. 1270.46 Cr. have  been  drawn  from  the  FFS  and  Rs.  4509.16  Cr.  have  been invested into 384 startups.
- ******

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (b)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO. 2614 FOR ANSWER ON 10.03.2021.

## Benefits to Startups under Atmanirbhar Bharat

## 1) Reserve Bank of India

1.1. Rescheduling of Payments  -  Term  Loans  and  Working  Capital Facilities i. In  respect  of  all  term  loans  (including  agricultural  term  loans, retail  and  crop  loans),  all  commercial  banks  (including  regional  rural banks, small finance banks and local area banks), co-operative banks, all-India  Financial  Institutions,  and  NBFCs  (including  housing  finance companies) ('lending institutions') were permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020. In view of the extension of lockdown  and  continuing  disruption  on  account  of  COVID-19,  all lending institutions were permitted to extend the moratorium by another three months i.e. from June 1, 2020 to August 31, 2020 on payment of all instalments in respect of term loans.

ii. In respect of working capital facilities sanctioned in the form of cash  credit/overdraft,  lending  institutions  were  permitted  to  defer  the recovery  of  interest  applied  in  respect  of  all  such  facilities  during  the period from March 1, 2020 upto May 31, 2020. Further extension was granted up to 31st August 2020.

iii. Kamath Committee: An expert committee formed by the Reserve  Bank  of  India  (RBI)  under  the  chairmanship  of  Shri  K.V. Kamath made recommendations on the required financial parameters to be factored in the resolution plans under the 'Resolution Framework for Covid19-related  Stress' along  with  sector  specific  benchmark ranges for such parameters. The recommendations of the Committee have  been  broadly  accepted  by  RBI.  Accordingly,  RBI  has  specified five specific financial ratios and the sector-specific thresholds for each ratio in respect of 26 sectors to be taken into account while finalising the resolution plans.

## 1.2. Easing of Working Capital Financing

In respect of working capital facilities sanctioned to borrowers facing stress on account  of  the  economic  fallout  of  the  pandemic,  lending  institutions  may recalculate the 'drawing power' by reducing the margins and/or by reassessing the working capital cycle. Further, accounts provided relief under these  instructions  shall  be  subject  to  subsequent  supervisory  review  with regard to their justifiability on account of the economic fallout from COVID-19.

## 2) Measures  for  businesses  including  MSMEs  -  These  measure would support eligible startups

- 2.1 Rs  3  lakh  crore  Emergency  Working  Capital  Facility  for  Businesses, including MSMEs.
- 2.2 Rs 20,000 crore Subordinate Debt for Stressed MSMEs.
- 2.3 Rs 50,000 crore Equity infusion for MSMEs through Fund of Funds.
- 2.4     New definition of MSME:

The  definition  of  micro  manufacturing  and  services  unit  increased  to  Rs.  1 crore  of  investment  and  Rs.  5  crore  of  turnover.  The  limit  of  small  unit increased to Rs. 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of a medium unit increased to Rs 20 crore of investment and Rs. 100 crore of turnover. The limit for medium manufacturing and service units was further increased to Rs. 50 crore of investment and Rs. 250 crore of turnover. It has also been decided that the turnover with respect to exports will not be counted  in  the  limits  of  turnover  for  any  category  of  MSME  units  whether micro, small or medium.

- *******

## ANNEXURE - IV

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (c)  OF  THE  LOK  SABHA  UNSTARRED QUESTION NO. 2614 FOR ANSWER ON 10.03.2021.

## MINISTRY OF COMMERCE AND INDUSTRY (Department for Promotion of Industry and Internal Trade) NOTIFICATION

New Delhi, the    19 th February, 2019 G.S.R. 127(E) - This notification is being issued in supersession of the Gazette Notification No. G.S.R. 364(E) dated April 11, 2018 as modified vide Gazette Notification No. G.S.R. 34(E) dated January 16, 2019.

## Definitions

1. In this notification,-
2. (a) An entity shall be considered as a Startup:
- i. Upto a period of ten years from the date of incorporation/ registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
- ii. Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded one hundred crore rupees.
- iii. Entity  is  working  towards  innovation,  development  or  improvement  of  products  or processes  or  services,  or  if  it  is  a  scalable  business  model  with  a  high  potential  of employment generation or wealth creation.

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a 'Startup'.

## Explanation-

An entity shall cease to be a Startup on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds one hundred crore rupees.

- (b) 'Act' means the Income-tax Act, 1961;
- (c) 'Board' means the Inter-Ministerial Board of Certification comprising of the following members:
- (i) Joint Secretary, Department of Promotion of Industry and Internal Trade, Convener
- (ii) Representative of Department of Biotechnology, Member
- (iii) Representative of Department of Science & Technology, Member
- (d) "CBDT" means Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);
- (e) 'limited  liability  partnership'  shall  have  the  meaning  as  assigned  to  it  in  clause  (n)  of  subsection(1) of Section 2 of the Limited Liability Partnership Act, 2008;
- (f) 'partnership firm' means a firm registered under section 59 of the Partnership Act, 1932;
- (g) 'private limited company' shall have the meaning as assigned to it in clause (68) Section 2 of the Companies Act, 2013;
- (i) 'turnover' shall have the meaning as assigned to it in clause (91) Section 2 of the Companies Act, 2013;
- (j) All references to 'Forms' in this notification shall be construed as references to the forms set out in Appendix-I hereto;
- (k) 'DPIIT' means Department for Promotion of Industry and Internal Trade.

## Recognition

2. The process of recognition of an eligible entity as startup shall be as under: -
2. (i) A Startup shall make an online application over the mobile app or portal set up by the DPIIT.
3. (ii) The application shall be accompanied by-
4. (a) a copy of Certificate of Incorporation or Registration, as the case may be, and
5. (b) a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability  in terms of employment generation or wealth creation.
6. (iii) The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit, -
7. (a) recognise the eligible entity as Startup; or
8. (b) reject the application by providing reasons.

## Certification for the purposes of section 80-IAC of the Act

3. A  Startup  being  a  private  limited  company  or  limited  liability  partnership,  which  fulfils  the conditions specified in sub-clause (i) and sub-clause (ii) of the Explanation to section 80-IAC of the

Act, may, for obtaining a certificate for the purposes of section 80-IAC of the Act, make an application in Form-1 along with documents specified therein to the Board and the Board may, after calling for such documents or information and making such enquires, as it may deem fit, -

- (i) grant the certificate referred to in sub-clause (c) of clause (ii) of the Explanation to section 80IAC of the Act; or
- (ii) reject the application by providing reasons.

## Exemption for the purpose of clause (viib) of sub-section (2) of section 56 of the Act

4. A Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of subsection (2) of section 56 of the Act and consequent exemption from the provisions of that clause, if it fulfils the following conditions:

- (i) it has been recognised by DPIIT under para 2(iii)(a) or as per any earlier notification on the subject
- (ii) aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees:

Provided that  in  computing  the  aggregate amount of paid  up share capital, the amount of paid up share capital and share premium of twenty five crore rupees in respect of shares issued to any of the following persons shall not be included─

- (a)  a non-resident; or
- (b)  a venture capital company or a venture capital fund;

Provided further that  considerations received by such startup for shares issued or proposed to be issued  to  a  specified  company  shall  also  be  exempt  and  shall  not  be  included  in  computing  the aggregate amount of paid up share capital and share premium of twenty five crore rupees.

iii) It has not invested in any of the following assets,─

- (a)  building or land appurtenant thereto, being a residential house, other than that used by the Startup for the purposes of renting or held by it  as stock-in-trade,  in the ordinary course of business;
- (b)  land  or  building,  or  both,  not  being  a  residential  house,  other  than  that  occupied  by  the Startup  for its business or used by it for purposes of renting or held by it as stock-in trade, in the ordinary course of business;
- (c)  loans  and  advances,  other  than  loans  or  advances  extended  in  the  ordinary  course  of business by the Startup where the lending of money is substantial part of its business;
- (d)  capital contribution made to any other entity;
- (e)  shares and securities;
- (f) a  motor  vehicle,  aircraft,  yacht  or  any  other  mode  of  transport,  the  actual  cost  of  which exceeds ten lakh rupees, other than that held by the Startup for the purpose of plying, hiring, leasing or as stock-in-trade,  in the ordinary course of business;
- (g)  jewellary  other  than  that  held  by  the  Startup  as  stock-in-trade    in  the  ordinary  course  of business;
- (h)  any other asset, whether in the nature of capital asset or otherwise, of the nature specified in sub-clauses (iv) to (ix) of clause (d) of Explanation to clause (vii) of sub-section (2) of section 56 of the Act.

Provided the Startup shall not invest in any of the assets specified in sub-clauses (a) to (h) for the period of seven years from the end of the latest financial year in which shares are issued at premium; Explanation.─ For the purposes of this paragraph,-

- (i) 'specified  company'  means  a  company  whose  shares  are  frequently  traded  within  the meaning of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)  Regulations,  2011  and  whose  net  worth  on  the  last  date  of  financial  year preceding the year in which shares are issued exceeds one hundred crore rupees or turnover for the financial year preceding the year in which shares are issued exceeds two hundred fifty crore rupees.
- (ii)  the  expressions  'venture  capital  company'  and  'venture  capital  fund'  shall  have  the  same meanings as respectively assigned to them in the explanation to clause (viib) of sub Section( 2) of Section 56 of the Act.

## Declaration

5. A  startup  fulfilling  conditions  mentioned  in  para  4  (i)  and  para  4  (ii)  shall  file  duly  signed declaration in Form 2 to DIPP that it fulfills the conditions mentioned in para 4. On receipt of such declaration, the DPIIT shall forward the same to the CBDT.

## Scope

6. Notification referred in para 4 shall apply irrespective of the dates on which shares are issued by the Start up from the date of its incorporation, except for the shares issued in respect of which an

- addition under section 56(2)(viib) of the Act has been made in an assessment order made under the Act before the date of issue of the notification. 7. Notification  referred  to  in  para  4  shall  be  applicable  only  in  respect  of  applicability  of  the provisions of section 56(2)(viib) of the Act to the Startup and shall not grant any exemption in respect of applicability of other provisions of the Act.

Revocation

8. (1) In case it is found that any certificate referred to para 3 has been obtained on the basis of false information, the Board reserves the right to revoke such certificate or approval. (2)  Where  the  certificate  or  approval  has  been  revoked  under  sub-para  (1),  such  certificate  or approval shall be deemed never to have been issued or granted by the Board.
9. In  case the  Startup  which  has furnished declaration in Form-2 invests in any of the assets specified in para 4(iii) before the end of seven year from the end of the latest financial year in which the shares are issued at premium, the exemption provided under section 56(2)(viib) of the Act shall be revoked with retrospective effect.

Effect

10. This notification shall come into effect on the date of its publication in the Official Gazette. The Government will carry out a review of this notification on or before 31.03.2021.

[F. No. 5(4)/2018-SI] ANIL AGRAWAL, Jt. Secy.

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## ANNEXURE - V

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (d)  OF  THE  LOK  SABHA  UNSTARRED QUESTION NO. 2614 FOR ANSWER ON 10.03.2021.

Government of India Ministry of Commerce & Industry Department for Promotion of Industry and Internal Trade (Startup India Section)

--------------

## NOTIFICATION

- S.O. 414(E). - The Central Government has approved the 'Startup India Seed Fund Scheme (SISFS)' to provide financial assistance to startups for proof of concept, prototype development,  product  trials,  market  entry  and  commercialization.  SISFS  shall  provide financial  assistance  to  startups  via  corpus  of  Rs.  945  Crore  that  will  be  disbursed  through selected incubators across India in 2021-25.
2.  The scheme is sector-agnostic and will support startups across all sectors. The scheme shall have a central common application on Startup India portal for startups and incubators on an ongoing basis.
3. SISFS will be implemented by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India.
4. The Guidelines of the above-mentioned scheme is available on the website of Startup India at https://www.startupindia.gov.in/.
5. Eligibility  Criteria  for  Startups: The  eligibility  criteria  for  a  startup  to  apply  under  the Startup India Seed Fund Scheme shall be as follows:
1. A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application
2. Startup must have a business idea to develop a product or a service with market fit, viable commercialization, and scope of scaling
3. Startup should be using technology in its core product or service, or business model, or distribution model, or methodology to solve the problem being targeted
4. Preference would be given to startups creating innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture,  food  processing,  biotechnology,  healthcare,  energy,  mobility,  defence, space, railways, oil and gas, textiles, etc.
5. Startup should not have received more than Rs 10 lakh of monetary support under any other Central or State Government scheme. This does not include prize money from competitions and grand challenges, subsidized working space, founder monthly allowance, access to labs, or access to prototyping facility
6. Shareholding by Indian promoters in the startup should be at least 51% at the time of application  to  incubator  for  the  scheme,  as  per  Companies  Act,  2013  and  SEBI (ICDR) Regulations, 2018
7. Any startup will not receive seed support more than once each as per provisions of guidelines.
6. Eligibility Criteria for Incubators: The eligibility criteria for an incubator to apply in the Startup India Seed Fund scheme are as follows:
1. Incubator must be a legal entity:
- a)  A society registered under the Societies Registration Act 1860, or
- b)  A Trust registered under the Indian Trusts Act 1882, or
- c)  A  Private  Limited  company  registered  under  the  Companies  Act  1956  or  the Companies Act 2013, or
- d)  A statutory body created through an Act of legislature
2. Incubator should be operational for at least two years on the date of application to the scheme
3. Incubator must have facilities to seat at least 25 individuals
4. Incubator must have at least 5 startups undergoing incubation physically on the date of application
5. Incubator  must  have  a  full-time  Chief  Executive  Officer,  experienced  in  business development  and  entrepreneurship,  supported  by  a  capable  team  responsible  for mentoring startups in testing and validating ideas, as well as in finance, legal and human resources functions
6. Incubator should not be disbursing seed fund to incubatees using funding from any thirdparty private entity
7. Incubator must have been assisted by Central/State Government(s)
8. In case the incubator has not been assisted by Central or State Government(s):
- a) Incubator must be operational for at least three years
- b) Must have at least 10 separate startups undergoing incubation in the incubator physically on the date of application
- c) Must present audited annual reports for the last 2 years
9. Any additional criteria as may be decided by the Experts Advisory Committee (EAC).
7. Assistance to Incubators: Experts Advisory Committee (EAC) shall evaluate incubators for grant assistance. A Grant of up to Rs. 5 (five) crore would be provided to a selected incubator in milestone-based  three  (or)  more  installments.  The  exact  quantum  of  grant  and  instalments  for each incubator will be decided by the Experts Advisory Committee (EAC) based on its evaluation
8. Disbursement of Seed Fund to Startups by Incubators: Seed Fund to an eligible startup by the incubator shall be disbursed as follows:
1. Up  to  Rs.  20  Lakhs  as  grant  for  validation  of  Proof  of  Concept,  or  prototype development, or product trials. The grant shall be disbursed in milestone-based installments. These  milestones  can  be  related  to  development  of  prototype,  product  testing,  building  a product ready for market launch, etc.
2. Up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments
3. Seed fund shall strictly not be used by startups for creation of any facilities and shall be utilized for the purpose it has been granted for
9. Constitution  of  Experts  Advisory  Committee: An  Experts  Advisory  Committee  (EAC)  will  be constituted by DPIIT, which will be responsible for the overall execution and monitoring of the Startup India Seed Fund Scheme. The EAC will evaluate and select incubators for allotment of Seed Funds, monitor progress, and take all necessary measures for efficient utilization of funds towards fulfilment of  objectives  of  Startup  India  Seed  Fund  Scheme.  The  Experts  Advisory  Committee  (EAC)  will comprise of the following members:
1. Chairman, an individual of eminence
2. Financial Advisor, DPIIT or his representative
3. Additional Secretary/ Joint Secretary/ Director/ Deputy Secretary, DPIIT (Convener)
4. Representative of Department of Biotechnology (DBT)
5. Representative of Department of Science & Technology (DST)
6. Representative of Ministry of Electronics and Information Technology (MeiTY)
7. Representative of Indian Council of Agricultural Research (ICAR)
8. Representative of NITI Aayog
9. At  least  three  expert  members  nominated  by  Secretary,  DPIIT  from  the  startup ecosystem, investors, experts in the domain of R&D, technology development and commercialization, entrepreneurship and other relevant domains.

New Delhi, 21 st January, 2021

## 10. Selection of Incubators:

10.1  Online  Applications  will  be  invited  from  incubators  across  India  to  participate  in  the scheme on  https://www.startupindia.gov.in  or  any  other  platform  specifically  designated  for the purpose.

Incubators shall be selected on the basis of the following parameters:

- a. Fulfillment of eligibility criteria
- b. Quality of the team of Incubator
- c. Available infrastructure, testing labs etc.
- d. Composition of ISMC (as defined in para 7)
- e. Incubation support provided by incubator in last three years:
- i. No. of startups incubated
- ii. No.  of  startups  graduated,  i.e.  progressed  from  one  stage  of  business development cycle to the next
- iii. No. of startups that raised follow on investments
- iv. No. of startups that crossed a revenue of Rs 1 Cr in last 1 year
- v. 2-year survival rate of startups from the date of joining incubator
- f. Funding support extended to incubatees in last three years:
- i. Investment agreements signed between incubator and startups
- ii. No. of startups invested in
- iii. Total corpus allocated to incubatees
- iv. Total investments raised by incubatees from external sources
- g. Mentoring provided to incubatees in last three years:
- i. No. of mentors hired
- ii. Average mentoring hours allocated per startup per month
- iii. No.  of  IP  (patents,  copyrights,  designs,  and  trademarks)  registered  by incubatees
- h. Other support extended to incubatees in last three years:
- i. Industry/Corporate connects
- ii. Events held for stakeholder engagements
- iii. Participation in other events
- i. Number of startups that the incubator intends to support
- j. Quantum of funds applied for, along with fund deployment plan with timelines
- k. Any other relevant parameters that decided by the EAC
27. 10.2 The Call for Applications for incubators will be open online throughout the year
28. 10.3 Experts Advisory Committee (EAC) will convene at least quarterly to:
1. Evaluate the applications received during the period
2. Select incubators for funds under the Scheme
3. Decide  the  total  amount  of  fund  and  number  of  installments  in  which  it  is  to  be allocated to each incubator
4. Specify milestones to be achieved by each incubator for release of installments
33. 10.4 EAC shall  also  monitor  progress  of  incubators  against  sanctioned  funds  under  the Scheme and take further actions as may be required
34. 10.5 EAC may lay down improved guidelines for selection of incubators under the scheme from time to time

## 11. Selection of Startups

- 11.1 Each  of  the  incubators  applying  for  the  Startup  India  Seed  Fund  Scheme  will constitute a committee called the Incubator Seed Management Committee (ISMC), consisting of experts who can evaluate and select startups for seed support. The composition of ISMC
- would be as follows: i. Nominee of Incubator (Chairman) ii. Representative from State Government's Startup Nodal Team iii. Representative of a Venture Capital Fund or Angel Network iv. A domain expert from Industry v. A domain expert from academia vi. Two successful Entrepreneurs
- vii. Any other relevant Stakeholder

The final composition and members of ISMC of each incubator shall be approved by EAC and will be a critical parameter in selection of incubators. 11.2 The  startups  shall  be  selected  through  an  open,  transparent  and  fair  process, comprising, inter-alia: i. An online  call  for  applications  shall  be  hosted  on  an  ongoing  basis  on  the  Startup India portal Applicants  can  apply  for  seed  fund  to  any  three  incubators  selected  as  disbursing

- ii. partners for this scheme in order of their preference
- iii. All  applications  received  will  be  shared online  with respective  incubators for further evaluation
- iv. The applicant may be  asked to submit details  on  team  profile,  problem  statement, product/service overview, business model, customer profile, market size, quantum of funds needed, projected utilization plan for funds, etc.
- v.     The incubators shall shortlist applicants as per eligibility criteria given in the guidelines.
- v. Eligible  applications  will  be  evaluated  by  ISMC  using  the  following criteria:

|    | Criteria                       | Details                                                                                                                                     | Weightage (%)   |
|----|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| 1  | Is there a need for this Idea? | Market size, what market gap is it filling, does it solve a real-world problem?                                                             | P               |
| 2  | Feasibility                    | Feasibility and reasonability of the technical claims, methodology used/ to be used for PoC and validation, roadmap for product development | q               |
| 3  | Potential Impact               | Customer demographic & the technology's effect on these, national importance (if any)                                                       | r               |
| 4  | Novelty                        | USP of the technology, associated IP                                                                                                        | s               |
| 5  | Team                           | Strength of the team, Technical and business expertise                                                                                      | t               |
| 6  | Fund Utilization Plan          | Roadmap of money utilization                                                                                                                | u               |
| 7  | Additional Parameters          | Any additional parameters considered appropriate by incubator                                                                               | v               |
| 8  | Presentation                   | Overall assessment                                                                                                                          | w               |
|    |                                |                                                                                                                                             | 100%            |

Weightages for criteria (p, q, r, s, t, u, v, w) may be assigned by each incubator differently

- vii. Incubator may shortlist applicants based on their evaluation for a presentation before ISMC
- viii. ISMC shall  evaluate  applicants  based  on  their  submissions  and  presentations  and select startups for Seed Fund within 45 days of receipt of application
- ix. All incubators shall provide information about progress of evaluation of startups realtime to Startup India portal
- x. Selected  startups  shall  receive  seed  funding  under  the  respective  incubator  that selects  them  as  beneficiaries  as  per  their  preference  shared  during  application  (for example, if  incubators  at  Preference  1  and  Preference  2  both  select  a  startup,  the funding  shall  be  given  by  Preference  1  incubator.  If  Preference  1  incubator  rejects and  Preference  2  incubator  selects,  the  funding  shall  be  given  by  incubator  at Preference 2, and so on.)
- xi. All applicants will be able to track the progress of their application on the Startup India portal on a real-time basis
- xii. Applicants who are rejected will also be notified through email
- xiii. An applicant, if rejected once, may apply afresh
8. 11.3 EAC may lay down improved guidelines for selection of startups under the scheme from time to time
12. The Department shall evaluate the outcome of the scheme by the end of 2024-25, especially with reference to financial, social and economic returns.

[F. No. P-38015/5/2020-STARTUP INDIA]

(Anil Agrawal) Joint Secretary to the Government of India

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