NEW DELHI: With Prime Minister Narendra Modi poised to announce the Start Up India, Stand Up India action plan on January 16, the government has drawn up a precise definition to ensure that benefits under the programme go to companies that are engaged in innovation.
The definition of a startup is likely to exclude entities formed by splitting or restructuring businesses or those that have been in existence for five years and exceed Rs 25 crore in sales.
Those that fit the description will be eligible for tax incentives and simplified compliance rules. Apart from innovation, such startups have to be engaged in the development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property, said a government official aware of the matter.
The launch of the programme will be attended by SoftBank Chief Executive Officer Masayoshi Son and Uber founder Travis Kalanick along with 40 top CEOs and founders of startups, venture capitalists and angel investors from Silicon Valley. The government wants to create a startup-friendly ecosystem as a means of creating jobs that will boost incomes and growth.
The Department of Industrial Policy & Promotion (DIPP), which is piloting the Start Up India, Stand Up India initiative, also plans to introduce several checks and balances that will determine the nature of innovation it’s looking for. It has finalised this after consultations with top industry executives. Proposals would have to be supported by recommendations from an incubator or be funded by incubation, angel or private equity funds registered with the capital market regulator or DIPP.
The latter is also likely to draw up a negative list, detailing the kind of businesses that won’t be eligible. Among other possible criteria would be endorsements by government-recognised incubators and startups funded through specific central schemes to promote innovation, the official said. Having an Indian patent in the area of business will also help.
SOPS FOR INVESTORS
Investors in such startups will get an exemption on capital gains besides several procedural relaxations, it is expected.