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Benefits of Startup India Scheme for Startups

by Ahlawat and Associates
Benefits of Startup India Scheme for Startups

Starting a business in India is not a herculean task. However, having a good business structure requires a strong foundation with a sharp business model and a well-advised legal foundation. Startups are gaining much popularity these days, and the government under the leadership of Prime Minister Narendra Modi has promoted the growth of such startups under its flagship Startup India Scheme.

To know the practical aspect of starting a business and availing benefits under various Government Schemes introduced by the Government of India, there are some steps.

Steps to starting a business and availing benefits under Government schemes:

1. Structuring of a Business Entity

The first step to starting a business in India is structuring a company. Choosing the right type of business entity to grow the business is essential. A business may be set up in India by way of a proprietorship, One Person Company, Partnership, Limited Liability Company, Private Limited Company and Public Limited Company.

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2. Incorporating a Company

Incorporation of a company is usually a lengthy process, and it is advised to have a legal firm, advocates, company secretaries and CA’s make the filing for incorporation to ensure the best and maximum benefits are reaped out of it.

The process usually includes procuring DIN’s, Digital Signatures, Drafting of Articles of Associations and Memorandum of Associations, obtaining PAN and TAN Numbers.

3. Obtaining Registrations and Licenses

The following are the various registrations and licenses which may be required to conduct business in India:

  • Registration under Employees Provident Fund
  • Registration Employee State Insurance (ESIC)
  • Obtaining Import Export Code (IEC), should a business be involved in import and export.
  • GST Registration
  • Shop and Establishment License for physical premises
  • Service Tax Number if your business consists of providing services
  • Professional Tax Registration

Further to this, industry-specific licenses may need to be applied for, such as FSSAI license for food manufacturers, transporters, distributors and others.

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4. Trademark Registration

As the business grows, it would become necessary to protect the goodwill of the business by trademarking its name, logo, tagline and others from being misused. It is advisable to trademark your brand before initiating any branding activity for complete protection of your interests.

5. Post-Incorporation Legal services

To safeguard your interests on legal grounds for the smooth functioning of your business operations, you may need to file for certain regulatory compliances as per the requirement by the law. You may need legal and secretarial advisory services for the same. It is advisable to select a legal firm that is apt at dealing with regular regulatory and compliance issues so that you may not need to hire multiple resources for the same work time and again.

6. Organizing the accounting and taxation system

Accounting and taxation is an integral part of any business, and a well-equipped accounting system would be a requirement for any business. Without a soundtrack of accounts for various transactions conducted by the business, annual tax filings and return filings could become a daunting task. 

7. Business Policies

Post incorporation a legal firm could also help in devising business policies for the smooth functioning of your business. For instance, Employment Manuals, Vendor Agreements, Client agreements, HR policy, IT Policy, Marketing Policy and other such documentation. Having a legal firm as a retainer could keep a thorough check on all of these policies and thus assist in business advancement.

8. Assistance with raising funding

A startup eventually needs to raise funding to grow. Entrepreneurs, at the stage of raising funds, could majorly benefit by being associated with a legal firm as the firm would be a pioneer at protecting their interests while dealing with investors.

What are the benefits of Startup India Scheme and how can startups avail them?

Startup India is a flagship scheme of Government of India instituted for the sole purpose of promoting Startup culture and to build a strong ecosystem for innovation and entrepreneurship in India. The main objective of the initiative was to transform India into a country of job creators instead of job seekers and thus there are numerous benefits of Startup India Scheme. Since the launch of this initiative on 16th January 2016, Startup India has turned out to be an effective scheme by rolling out several programs to support entrepreneurs.

Those entities which are recognized as startups by the Department for Promotion of Industry and Internal Trade(“DPIIT”) are enjoy certain benefits of Startup India Scheme which are enlisted below:

1. Self-Certification of compliances under various laws

One of the benefits of the Startup India Scheme is that the startups are allowed to self-certify themselves under specific labour and environment laws to ensure their business efficiency and to assist them in keeping a relatively low cost of compliances. They are also exempted from inspection under labour laws for a period of 3 years.

2. Intellectual Property Rights Benefits

Startup India provides new startups with certain Intellectual Property Rights(“IPR”) benefits for Patent filings and rebate on patent and trademark filing to facilitate cost-effectiveness for startups.

3. Tax Exemption

The startups which are recognized by the DPIIT are entitled to apply for an exemption of 100% income tax under Section 80-IAC of the Income Tax Act(“Act”), 1961 for three years. The startups are also eligible to claim an exemption under the said section subject to the conditions and provisions by filing a simple declaration in Form-2 and any other notification or order issued by the government from time to time. This counts as one of the major benefits of Startup India Scheme. 

4. Fast Track Exit Option/ Winding-up

Startups also are known as “fast track firms” as notified by Ministry of Corporate Affairs are granted permission which enables the startups to wind up their operations within 90 days as compared to 180 days for other companies. 

With sound legal assistance and knowledge of the law, a startup can avoid the hurdles in the course of doing business. All entrepreneurs should have a proper legal understanding either on their own or through their association with trusted legal advisors at the outset of their startup, to maintain and regulate their business to expand and grow.

This article has been written by Ahlawat & Associates. Ahlawat & Associates is a full-service law firm in Delhi, India that offers comprehensive counsel on a range of legal services (globally). With an aim to provide valued, practical, and strategic legal solutions to help clients achieve their goals, A&A combines the highest global standards with local expertise.  

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