With the Department of Industrial Policy and Promotion (DIPP) relaxing the definition of “Startups” and streamlining the process of recognition of the same, the benefits for such Startups are now both readily and more widely available. Below is a list of the most important benefits provided for Startups by different government agencies.

1. Intellectual Property Rights (“IPRs”)

1. 1.1 The Startup India Initiative wants to promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs by providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.
2. 1.2 Under the new Trademark Rules, 2017; a reduced fee of INR 5,000 for physical filing has been prescribed for individuals, Startups and small enterprises.
3. 1.3 Apart from the above, a Scheme for Facilitating Startups Intellectual Property Protection (“SIPP“) was introduced and it allows Startups to apply for IPR related advisory and applications which shall be provided on a pro-bono basis by the empanelled facilitators. The fees shall be paid directly to the facilitator by the Central Government through the office of the CGPDTM and disbursed by the respective IP office. SIPP will remain valid until 1st April, 2020 as it came into force on 1st April, 2017 for a period of three years.
4. 1.4 Startups will have to provide a self-declaration that they have not availed funds any other Government scheme for the purpose of paying the facilitator/patent agent/trademark agent for filing and prosecuting their IP application.

2. Tax Exemptions

1. 2.1 Tax Exemption on Capital Gains
1. Section 54 EE has been introduced under the Finance Act, 2016 which provides for exemption of capital gain arising out of transfer of long term capital asset (not exceeding INR 50 lakh in a financial year) invested in a fund notified by Central Government.
2. Section 54 GB of Income-tax Act, 1961 has been amended to provide 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 equity shares of an eligible Startup for utilizing the same to purchase specified asset.
2. 2.2 Tax Exemption to Startups for 3 Years
• In the Union Budget 2017-18, the Government has increased the period of profit-linked deductions available to eligible Startups to 7 years. Startup is eligible to avail income tax exemption for three consecutive assessment years out of a block of seven years, which was earlier five years.
3. 2.3 Tax Exemption on Investments above Fair Market Value
1. The infamous Angel Tax has been dealt with by the tax exemption for Startups who get investments above Fair Market Value.
2. A certificate of eligibility shall be required from the Inter-Ministerial Board, for Startups availing tax benefits under the Income Tax Act, 1961.
3. Startups will therefore have to get Inter-Ministerial Board approval in order to avail this tax exemption.

3. Faster Exit for Startups

1. 3.1 The Insolvency and Bankruptcy Code, 2016 (“IBC”) has provided for fast track corporate insolvency resolution process.
2. 3.2 Sections 55 to 58 of IBC has been notified in 16th June, 2017. The notified sections pertained to the Fast Track process and it was also notified that the process shall apply to Startup (other than the partnership firm) as defined by DIPP. For Startups, Insolvency Resolution process will now be completed within 90 days as against 180 days for other entities

4. Reserve Bank of India

1. 4.1 External Commercial Borrowing (ECB) guidelines for Startups
1. Startups can borrow up to $3 million or equivalent per financial year, either in rupees, or any convertible foreign currency or a combination of both, for a minimum average maturity period of three years.
2. 4.2 Foreign venture capital investors (FVCI)
1. FVCI are now allowed to invest in Startups irrespective of any sector without Reserve Bank of India’s approval.
3. 4.3 Convertible Notes
1. RBI now allows Startups to issue convertible notes to foreign investors who wish to invest INR 25 lakhs and above and has further specified that this will be treated as an instrument evidencing a debt which is either:
• Repayable at the option of the holder or
• Convertible into equity within a period of five years (from the date of issue) upon occurrence of certain events mentioned in the note.
• Such conversion to equity will have to be made in compliance with RBI’s pricing guidelines and as per the relevant requirements under the FDI policy.

5. SEBI

1. 5.1 SEBI (Foreign Portfolio Investors) Regulations, 2014
• It has been amended to permit FPIs to invest in unlisted Non-Convertible debentures and securitised debt instruments.
2. 5.2 SEBI (Alternative Investment Funds) Regulations, 2012
• The SEBI Board has approved five key amendments herein, with respect to ‘Angel Funds’:
1. The upper limit for number of angel investors in a scheme has been increased from forty nine to two hundred
2. Angel Funds will be allowed to invest in start-ups incorporated within five years, which was earlier 3 years.
3. The requirement of minimum investment amount by an Angel Fund in any venture capital undertaking has been reduced from INR 50 lakh to INR 25 lakh.
4. The lock-in requirements of investment made by Angel Funds in a venture capital undertaking has been reduced from three years to one year.
5. Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs.

6. Labour Compliances

1. 6.1 Startups will be allowed to self-certify for a period of five years with various labour laws such as:
1. Industrial Disputes Act, 1947
2. Trade Unions Act, 1926
3. Building and Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
4. Industrial Employment (Standing Orders) Act, 1946
5. Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
6. Payment of Gratuity Act, 1972
7. Contract Labour (Regulation and Abolition) Act, 1970
8. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
9. Employees’ State Insurance Act, 1948
2. 6.2 Following the above mentioned first year, from the second year onwards up to the next five years, Startups may be taken up for inspection only when credible and verifiable complaint of violation has been filed in writing and approval has been obtained from at least one level senior to the inspecting officer or from the Central Analysis and Intelligence Unit, as the case may be.
3. 6.3 Apprentices Act, 1961
1. This act states that establishments must be inspected by an Officer. This requirement has been waived off for Startups during their first year from incorporation and they can provide self-certification for this purpose during this period. From the second year onwards up to the next three years, Startups may be taken up for inspection only when credible and verifiable complaint of violation has been filed in writing and approval has been obtained from concerned Apprenticeship Advisor.

7. Environment Law compliances

1. In case of environment laws, Startups which fall under the “White Category” (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases.

It is clear that the Government of India has attempted to encourage the proliferation of innovation within the start-up sector of the Indian economy by providing the above and more benefits to recognised Startups.