Lok Sabha Question No. 2963 (UNSTARRED), answered on 2021-12-15
Subject: Generation of Jobs by Startups
Ministry: COMMERCE AND INDUSTRY
Asked by: Riti Pathak, Navneet Ravi Rana

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

## LOK SABHA

UNSTARRED QUESTION NO. 2963. TO BE ANSWERED ON WEDNESDAY, THE 15 TH  DECEMBER, 2021.

## GENERATION OF JOBS BY STARTUPS

## 2963.  SHRIMATI RITI PATHAK:

SHRIMATI NAVNEET RAVI RANA:

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

## वाणिज्य  एवं उद्योग मंत्री

- (a) the  number  of  job  opportunities  generated  by  startups  in  the  country, particularly those in Maharashtra and Madhya Pradesh during the last three years along with the year-wise contribution made by such companies in the Gross Domestic Production of the country; and
- (b) the steps taken by the Government to promote private investment in startups including  the  promotional  package  being  given  by  the  Government  in  this regard?

## 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): The number of jobs generated in last three years in the country, as reported by startups recognized by DPIIT, is as follows:

| Year                       |   Jobs Reported by Recognized Startups (as on 08 th December 2021) |
|----------------------------|--------------------------------------------------------------------|
| 2018                       |                                                              93527 |
| 2019                       |                                                             142646 |
| 2020                       |                                                             169724 |
| 2021 (till 08 th December) |                                                             192427 |
| Total                      |                                                             598324 |

The number of jobs generated in Maharashtra and Madhya Pradesh in last three years, as reported by startups recognized by DPIIT, is as follows:

| Year                       |   Jobs Reported by Recognized Startups from Maharashtra (as on 08 th December 2021) |   Jobs Reported by Recognized Startups from Madhya Pradesh (as on 08 th December 2021) |
|----------------------------|-------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|
| 2018                       |                                                                               18779 |                                                                                   2419 |
| 2019                       |                                                                               25389 |                                                                                   4561 |
| 2020                       |                                                                               33108 |                                                                                   3614 |
| 2021 (till 08 th December) |                                                                               37257 |                                                                                   6425 |
| Total                      |                                                                              114533 |                                                                                  17019 |

There  is  no  centralized  compilation  of  information  on  year-wise  contribution made by startups in the Gross Domestic Production of the country.

- (b): Government of India as part of Startup India initiative has implemented Fund of Funds for Startups (FFS) Scheme and Startup India Seed Fund Scheme (SISFS) across all States/UTs to promote private investment in the Startups through Alternative Investment Funds (AIFs) and incubators.

Under FFS, a corpus of Rs. 10,000 crore has been sanctioned, spread over 14th  and  15th  Finance  Commission  cycles.  Small  Industries  Development Bank of India (SIDBI) is the nodal bank under this Scheme. The FFS Scheme does  not  directly  provide  financial  assistance  to  startups,  instead  supports SEBI- registered Alternative Investment Funds (AIFs), who in turn invest money in growing Indian startups through equity and equity-linked instruments.

Under the Startup India Seed Fund Scheme (SISFS), Rs. 945 crore has been sanctioned for period of 4 years starting from 2021-22. The funds are released to Startups through approved Incubators.

Further, 49 key regulatory changes to enhance ease of doing business, raising capital and reducing compliance burden have been undertaken. This includes insurers, EPFO, non-government provident funds, superannuation, and gratuity funds to invest in AIFs, thereby enabling billions of dollars' worth of domestic capital being made available for the Indian startup ecosystem. The list of the 49 key regulatory reforms is placed at Annexure-I .

Furthermore, requirement of prior turnover and experience has been relaxed to encourage startups to participate for tenders. Startups have been exempted from requirement of earnest money deposit. 'GeM Startup Runway' has been launched with dedicated corner for startups to sell products and services to Government. As on 3rd October, 2021, 11,386 startups had been on boarded on GeM, with 93,908 orders from public entities.

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## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (b)  OF  THE    LOK  SABHA UNSTARRED QUESTION NO. 2963 FOR ANSWER ON 15 TH  DECEMBER, 2021.

## List of 49 key Regulatory Reforms

## A.  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)

## B.  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.  04-012017.
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)
10.  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)
11.  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)

## C.   Ministry of Corporate Affairs

12.  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)
13.  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)
14.  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)
15.  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)
16.  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)
17.  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)
18.  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)
19.  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)

20.  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).
21.  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)
22.  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)
23.  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)
24.  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)
25.  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 NonResident Indians (NRIs) to incorporate OPCs in India. (February 2021)

## D.  Ministry of Finance

## Department of Revenue

26.  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)
27.  Definition of eligible business as stated in Section 80-IAC aligned with Startups definition. (April, 2018)
28.  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)
29.  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)
30.  Minimum  Alternate  Tax  credit  allowed  to  be  carried  forward  up  to  fifteenth assessment years instead of ten assessment years. (2017)
31.  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)
32.  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)
33.  Taxation of convertible notes - Period for which a bond, debenture, debenturestock 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)
34.  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
35.  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
36.  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)
37.  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)
38.  The Finance Act 2020 provides for amendment in section 80-IAC of the Incometax 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).
39.  The Finance Act 2020 provides for amendment in section 80-IAC of the Incometax 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)
40.  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.
41.  The Finance Bill 2021 provides for extension of the eligibility period to claim tax holiday for the startups by one more year.
42.  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.

## Department of Economics Affairs

43.  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

44.  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

45.  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

46.  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

47.  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

48.  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)
49.  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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