Lok Sabha Question No. 103 (STARRED), answered on 2022-12-14
Subject: Start-up India Initiative
Ministry: COMMERCE AND INDUSTRY
Asked by: Poonamben Hematbhai Maadam

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

## LOK SABHA

## STARRED QUESTION NO. 103.

TO BE ANSWERED ON WEDNESDAY, THE 14 TH  DECEMBER, 2022.

## START-UP INDIA INITIATIVE

## *103.  SHRIMATI POONAMBEN MAADAM:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) the details of the steps taken/being taken by the Government under 'Start-up India initiative' to promote private investment in the start-ups;
- (b) the  details  of  the  funds  sanctioned  under  Start-up  India  Seed  Fund  Scheme (SISFS);
- (c) the regulatory reforms undertaken by the Government to enhance ease of doing business, raising capital and  reducing  compliance  burden  for  recognized start-ups; and
- (d) the number of recognized start-ups that has been on board on the 'GeM Start-up Runway' in one year?

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

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

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF THE LOK SABHA STARRED QUESTION NO. 103 FOR ANSWER ON 14TH DECEMBER, 2022.

- (a): The Government with an intent to build a strong ecosystem for nurturing innovation,  startups  and  encouraging  private  investments  in  startup ecosystem of the country launched Startup India initiative on 16th January 2016.

In order to meet the objectives of the initiative, the Government unveiled an Action Plan for Startup India that laid the foundation of Government support,  schemes  and  incentives  envisaged  to  create  a  vibrant  startup ecosystem in the country. 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'.

Realising  the  action  items,  various  programs  are  implemented  by  the Government  under  Startup  India  initiative  to  recognise,  develop  and promote the startups to be able to raise private investments.

Sustained Government efforts in this direction have resulted in increasing the number of recognized startups from 452 in 2016 to 84,012 in 2022 (as on 30th November 2022).

The flagship Schemes namely, Fund of Funds for Startups (FFS), Startup India  Seed  Fund  Scheme  (SISFS)  and  Credit  Guarantee  Scheme  for Startups  (CGSS)  extend  support  to  startups  at  various  stages  of  their business cycle. The startups thereafter, are able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions. The Government also implements flagship annual exercises  and  programs  including  States'  Startup  Ranking,  National Startup  Awards  and  Innovation  Week  which  play  an  important  role  in holistic development of the startup ecosystem. The Government through stakeholder consultations seeks regulatory and policy related recommendations  for  enhancing  ease  of  doing  business  and  reducing compliance burden for startup ecosystem. The Government also facilitates participation and engagement of Indian startup ecosystem at international platforms.  Details  of  such  programs  implemented  under  Startup  India initiative by the Government are placed as Annexure-I.

- (b): The Startup India Seed Fund Scheme has been approved for the period of 4  years  starting  from  2021-22.  The  Scheme  aims  to  provide  financial assistance to startups for proof of concept, prototype development, product trials,  market  entry  and  commercialization.  It  is  implemented  with  effect from 1st April 2021 with a corpus of Rs. 945 crore.

Under  SISFS,  as  per  provisions  of  the  Scheme,  the  Government  has constituted an Experts Advisory Committee (EAC) which is responsible for the overall execution and monitoring of the SISFS. The EAC evaluates and

|      | selects incubators for allocation of funds under the Scheme. The selected incubators thereon shortlist the startups based on certain parameters outlined in Scheme guidelines.126 incubators have been approved so far for support of Rs. 455.25 crore. Rs. 186.15 crore has been disbursed under this scheme as on 30th November 2022.                                                                                                                                                                                                    |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (c): | The Government has taken various measures to enhance ease of doing business, raising capital and reducing compliance burden. In this regard, a list of the 53 key regulatory reforms undertaken for startup ecosystem is placed at Annexure-II.                                                                                                                                                                                                                                                                                            |
| (d): | Government e-Marketplace (GeM) platform was launched as an online, end to end solution for procurement of Goods and Services by Government Buyers including Central & State Ministries, Departments, Public Sector Enterprises, Autonomous Institutions, Local Bodies, etc. GeM was launched to bring transparency, efficiency and inclusivity in the public procurement process.                                                                                                                                                          |
|      | On GeM platform, DPIIT recognised startups were extended with relaxations and benefits available to them in public procurement as per the provisions of the General Financial Rules (GFR) including in prior experience, prior turnover and furnishing earnest money deposit. 17,571 DPIIT recognised startups have been on-boarded on GeM and a total of over 1.66 lakh orders from public entities have been placed to the recognised startups with a cumulative value of over Rs. 10,000 crore as on 30th November 2022.                |
|      | Furthermore, GeM has also developed GeM Startup Runway, which is a dedicated marketplace category exclusively for startups. Startups on GeM Startup Runway can list multiple products and services with minimal technical specifications under 14 globally recognized startup segments. Such an exclusive marketplace also enables brand and Intellectual Property (IP) protection for the startups. 35 startups and 17 startups were on-boarded on GeM Startup Runway in the years 2021 and 2022 (as on 30th November 2022) respectively. |

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ANNEXURE-I

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (a)  OF  THE    LOK  SABHA STARRED QUESTION NO. 103 FOR ANSWER ON 14.12.2022.

## Programs Implemented under Startup India initiative

The details of various programs undertaken by the Government to promote startups under Startup India initiative across the country are as under:

1. Fund of Funds for Startups (FFS) Scheme : To encourage private venture capital (private equity) investments in startups, the Government is implementing the Fund of Funds for Startups Scheme which was approved and established with a corpus of  Rs  10,000  crore,  with  contribution  spread  over  the  14th  and  15th  Finance Commission cycle based on progress of implementation. The FFS does not directly invest in startups, instead provides capital to SEBI-registered Alternative Investment Funds (AIFs), known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments. Small Industries Development Bank of India (SIDBI) has been given the mandate of operating this Fund through selection  of  suitable  daughter  funds  and  overseeing  the  disbursal  of  committed capital.  AIFs  supported  under  FFS  are  required  to  invest  at  least  2  times  of  the amount committed under FFS in startups.

Rs. 7,528 crore has been committed to 93 AIFs under FFS as on 30 th  November 2022. The commitments under FFS to AIFs has helped catalyse investment of nearly Rs. 13,493 crore in 773 startups.

2. Startup  India  Seed  Fund  Scheme  (SISFS): To  encourage  private  capital  at early/seed stage of startups, the Government is implementing Startup India Seed Fund  Scheme.  SISFS  aims  to  provide  financial  assistance  to  DPIIT  recognised startups for proof of concept, prototype development, product trials, market entry and commercialization to enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists, or seek loans from commercial banks or financial institutions. Under the Scheme, funds are disbursed to eligible startups through eligible incubators across India.

Rs. 455.25 crore has been approved to 126 incubators under the Scheme as on 30th November 2022.

3. Exemption for the Purpose Of Clause (VII)(b) of Sub-section (2) of Section 56 of  the  Act  (2019) :  To  promote  angel  investments  (earliest  equity  investments  in startups seeking capital for the growth of their businesses), the Government in 2019 had introduced an exclusive exemption for DPIIT recognised startups from the tax levied under Section 56(2) (viib) of the Income Tax Act, 1961 ('the Act'), subject to applicable conditions, when such a startup receives any consideration for issue of shares which exceeds the Fair Market Value of such shares.
4. Regulatory  Reforms :  Over  50  regulatory  reforms have  been  undertaken by  the Government since 2016 to enhance ease of doing business, ease of raising capital and reduce compliance burden for the startup ecosystem.
5. Credit Guarantee Scheme for Startups (CGSS) : The Government has established the Credit Guarantee Scheme for Startups for providing credit guarantees to loans extended  to  DPIIT  recognized  startups  by  Scheduled  Commercial  Banks,  NonBanking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered AIFs. CGSS is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. DPIIT recognised startups.
6. Ease  of  Procurement :  To  enable  ease  of  procurement,  Central  Ministries/ Departments are directed to relax conditions of prior turnover and prior experience in public procurement for all DPIIT recognised startups subject to meeting quality and  technical  specifications.  Further,  Government  e-Marketplace  (GeM)  Startup Runway has been developed which is a dedicated corner for startups to sell products and services directly to the Government.
7. Support for Intellectual Property Protection : Startups are eligible for fast-tracked patent application examination and disposal. The Government launched Start-ups Intellectual Property Protection (SIPP) which facilitates the startups to file applications for patents, designs and trademarks through registered facilitators in appropriate  IP  offices  by  paying  only  the  statutory  fees.  Facilitators  under  this Scheme  are  responsible  for  providing  general  advisory  on  different  IPRs,  and information on protecting and promoting IPRs in other countries. The Government bears  the  entire  fees  of  the  facilitators  for  any  number  of  patents,  trademark  or designs, and startups only bear the cost of the statutory fees payable. Startups are provided with an 80% rebate in filing of patents and 50% rebate in filling of trademark vis-a-vis other companies.
8. Self-Certification under Labour and Environmental laws : Startups are allowed to self-certify their compliance under 9 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.
9. Income Tax Exemption for 3 years: Startups incorporated on or after 1st April 2016 can apply for income tax exemption. The recognized startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.
10. International Market Access to Indian Startups : One of the key objectives under the  Startup  India  initiative  is  to  help  connect  Indian  startup  ecosystem  to  global startup  ecosystems  through  various  engagement  models.  This  has  been  done though  international  Government  to  Government  partnerships,  participation  in international  forums  and  hosting  of  global  events.  Startup  India  has  launched bridges  with  over  15  countries  (Brazil,  Sweden,  Russia,  Portugal,  UK,  Finland, Netherlands, Singapore, Israel, Japan, South Korea, Canada, Croatia, Qatar and UAE) that provides a soft-landing platform for startups from the partner nations and aid in promoting cross collaboration.
11. Faster Exit for Startups : The Government has notified Startups as 'fast track firms' enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies.
12. Startup  India:  The  Way  Ahead :  Startup  India:  The  Way  Ahead  at  5  years celebration  of  Startup  India  was  unveiled  on  16 th   January  2021  which  includes actionable plans for promotion of ease of doing business for startups, greater role of technology  in  executing  various  reforms,  building  capacities  of  stakeholders  and enabling a digital Aatmanirbhar Bharat.
13. Startup India Hub : The Government launched a Startup India Online Hub on 19 th June  2017  which  is  one  of  its  kind  online  platform  for  all  stakeholders  of  the entrepreneurial ecosystem in India to discover, connect and engage with each other. The Online Hub hosts Startups, Investors, Funds, Mentors, Academic Institutions, Incubators, Accelerators, Corporates, Government Bodies and more.
14. Startup India Showcase : Startup India Showcase is an online discovery platform for the most promising startups of the country chosen through various programs for startups  exhibited  in  a  form  of  virtual  profiles.  The  startups  showcased  on  the platform have distinctly emerged as the best in their fields. These innovations span across various cutting-edge sectors such as Fintech, EntrepriseTech, Social Impact, HealthTech, EdTech, among others. These startups are solving critical problems and  have  shown  exceptional  innovation  in  their  respective  sectors.  Ecosystem stakeholders have nurtured and supported these startups, thereby validating their presence on this platform.
15. National  Startup  Awards  (NSA) :  National  Startup  Awards  is  an  initiative  to recognize and reward outstanding startups and ecosystem enablers that are building innovative  products  or  solutions  and  scalable  enterprises,  with  high  potential  of employment  generation  or  wealth  creation,  demonstrating  measurable  social impact. Handholding support is provided to all the finalists across various tracks viz. Investor  Connect,  Mentorship,  Corporate  Connect,  Govt.  Connect,  International Market  Access,  Regulatory  Support,  Startup  Champions  on  Doordarshan  and Startup India Showcase, etc.
16. States' Startup Ranking Framework (SRF) : States' Startup Ranking Framework is  a  unique  initiative  to  harness  strength  of  competitive  federalism  and  create  a flourishing startup ecosystem in the country. The major objectives of the ranking exercise  are  facilitating  states  to  identify,  learn  and  replace  good  practices, highlighting the policy intervention by states for promoting startup ecosystem and fostering competitiveness among states.
17. National  Startup  Advisory  Council :  The  Government  in  January  2020  notified constitution 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.  Besides  the  ex-officio  members,  the  council  has  a number of non-official members, representing various stakeholders from the startup ecosystem.
18. Startup Champions on Doordarshan : Startup Champions program on Doordarshan  is  a  one-hour  weekly  program  covering  stories  of  award  winning/ nationally  recognised  startups.  It  is  telecasted  in  both  Hindi  and  English  across Doordarshan network channels.
19. Startup  India  Innovation  Week :  The  Government  organises  Startup  India Innovation week around the National Startup Day i.e. 16 th  January, with the primary goal  was  to  bring  together  the  country's  key  startups,  entrepreneurs,  investors, incubators, funding entities, banks, policymakers, and other national/international stakeholders to celebrate entrepreneurship and promote innovation.

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## ANNEXURE-II

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (c)  OF  THE    LOK  SABHA STARRED QUESTION NO. 103 FOR ANSWER ON 14.12.2022.

53 key regulatory reforms undertaken for startup ecosystem are as under:

## 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)
5.  Under FDI Policy, tenure of Startup has been aligned with DPIIT Notification dated 19th February,2019 for the purpose of definition of convertible notes. (March 2022)

## Securities and Exchange Board of India (SEBI)

6.  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.
7.  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.
8.  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
9.  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
10.  'Operating  Guidelines  for  Alternative  Investment  Funds  in  International  Financial Services Centres' issued by SEBI. (Nov, 2018)
11.  Under AIF Regulations, definition of Startup has been aligned with DPIIT Notification dated 19 th  February,2019 for the purpose of investment by Angel Funds in Startups (5 th  May,2021)
12.  The  SEBI  (Alternative  Investment  Fund)  (Second  Amendment) Regulations 2021 removes  the  list  of  restricted  activities  or  sectors  from  the  definition  of  Venture Capital Undertaking i.e. Category 1 AIFs can now invest in NBFCs.  (5 th  May 2021)

## Ministry of Corporate Affairs

13.  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)
14.  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)
15.  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)
16.  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)
17.  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)
18.  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)
19.  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)
20.  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 19th 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)

21.  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).
22.  As  part  of  Government of India's Ease of Doing Business (EODB) initiatives, the Ministry of Corporate Affairs has launched a new integrated Web Form christened 'SPICe+' replacing the existing SPICe form. SPICe+ would offer 10 services by 3 Central  Govt  Ministries  &  Departments  (Ministry  of  Corporate  Affairs,  Ministry  of Labour  &  Department  of  Revenue  in  the  Ministry  of  Finance)  and  One  State Government(Maharashtra), thereby saving as many procedures, time and cost for Starting  a  Business  in  India  and  would  be  applicable  for  all  new  company incorporations w.e.f.23rd February 2020. SPICe+ has two parts: Part A-for Name

reservation for new  companies and Part B offering a bouquet of services viz.  (i) Incorporation (ii) DIN allotment (iii) Mandatory issue of PAN (iv) Mandatory issue of TAN  (v)  Mandatory  issue  of  EPFO  registration  (vi)  Mandatory  issue  of  ESIC registration (vii) Mandatory issue of Profession Tax registration(Maharashtra) (viii) Mandatory Opening of Bank Account for the Company and (ix) Allotment of GSTIN (if so applied for) (February 2020)

23.  Amendment  in  Companies  (Share  Capital  and  Debentures)  Rules,  2014:  The Ministry of Corporate Affairs issued a notification on 05th June, 2020 increasing the period in  which  Sweat Equity shares, 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 19th Feb, 2019. (June 2020)
24.  Amendment in Companies (Acceptance of Deposits) Rules, 2014: The Ministry of Corporate  Affairs  issued  a  notification  on  07th  September,  2020  increasing  the period of issuance of convertible note, from 5 years to 10 years from the date of issue and thereby aligned the provisions of the Companies (Acceptance of Deposits) Rules, 2014 with the provisions referred to in the DPIIT notification dated 19th Feb, 2019. (September 2020)
25.  Amendment in Companies (Acceptance of Deposits) Rules, 2014: The Ministry of Corporate  Affairs  issued  a  notification  on  07th  September,  2020  whereby  the maximum limit in respect of deposits to be accepted from members by a private company shall not apply to a start-up company for 10 years from the date of its incorporation, instead of 5 years. (September 2020)
26.  Incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non-Resident Indians (NRIs) to incorporate OPCs in India. (February 2021)
27.  Amendment in Insolvency and Bankruptcy Code, 2016: The Ministry of Corporate Affairs  issued  a  notification  on  30th  August,  2022  harmonizing  the  definition  of startup with the DPIIT notification dated 19 th  February 2019. (August 2022)

## Ministry of Finance

## Department of Revenue

28.  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)
29.  Definition  of  eligible  business  as  stated  in  Section  80-IAC  aligned  with  Startups definition. (April, 2018)
30.  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)
31.  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)
32.  Minimum  Alternate  Tax  credit  allowed  to  be  carried  forward  up  to  fifteenth assessment years instead of ten assessment years. (2017)
33.  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)
34.  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)
35.  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)
36.  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
37.  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
38.  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)
39.  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)
40.  The Finance Act 2020 provides for amendment in 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).
41.  The Finance Act 2020 provides for amendment in 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)

42.  The Finance Act 2020 provides for amendment in sections 156, 191 and 192 of the Income Tax Act laying 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. (Feb 2020)
43.  The  Finance  Bill  2021  provides  for  extension  of  the  eligibility  period  to  claim  tax holiday for the startups by one more year. (Feb 2021)
44.  The Finance Bill 2021 provides for extension of claiming Capital gains exemption for investment in startups by one year i.e. till 31 March, 2022. (Feb 2021)
45.  The  Finance  Bill  2022  provides  for  extension  of  the  eligibility  period  to  claim  tax holiday for the startups by one more year. (Feb 2022)
46.  The Finance Bill 2022 capped the surcharge on the long term capital gain at 15% for unlisted companies from existing 37%. The effective rate of tax has been reduced from 28.5% to 23.9%. (Feb 2022)

## Department of Economics Affairs

47.  The Ministry of Finance now allows non-government provident funds, superannuation, and gratuity funds to invest up to 5 percent of their investible surplus in Category I and II Alternate Investment Funds (AIFs) registered with SEBI. (March 2021).

## Insurance Regulatory and Development Authority

48.  The Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurance companies to invest in Fund-of-Funds (FoF) that invest within the country subject to certain conditions. (April 2021).

## Department of Expenditure

49.  Harmonization of Startup Definition under the Manual for Procurement of Consultancy and other Services with the DPIIT notification dated 19 th  February 2019.

## Ministry of Labour and Employment

50.  The Ministry of Labour and Employment now allows EPFO to invest up to 5 percent of  their  investible  surplus  in  Category  I  and  II  Alternate  Investment  Funds  (AIFs) registered with SEBI. (April 2021)

## Ministry of Electronics and Information Technology

51.  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

52.  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) 53.  Ministry  of  Commerce  and  Industry,  Department  for  Promotion  of  Industry  and Internal Trade vide Gazette Notification No. G.S.R. 646(E). dated 21st September 2021 amended the Patent Rules. The Patent Rules have now extended the benefits related to 80% reduced fee for patent filing & prosecution to Educational institutions

- as well. (Sept 2021)
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