The government of India initiative for creating job opportunities and wealth was launched by Prime Minister Narendra Modi on 16th January 2016. It was named as the Start-up India Scheme. The startup India scheme’s primary objective is to develop and innovate products and services and create more job opportunities in India. This would further lead to an increased employment rate and help strengthen the economy.
The scheme not just facilitates job opportunities, it also allows the companies to avail of various benefits set forth by the government in terms of tax, compliance and more. As such, any company with less than 10 years of existence, less than 100 crores of turnover, that was not formed by splitting up or reconstruction of an existing business and has a high potential of creating business and employment is classified as a start-up or is eligible to avail the benefits under Startup India Scheme. These startups can be registered either as partnership firms, Limited Liability Partnership (LLP) or Private Limited Company.
The Startup India-plan of Action
The Government has taken a few measures to simplify the process of entering into the Startup India scheme. Let’s discuss the few measures taken to motivate the startups to enter into the scheme.
Simplification of Work
Like any government schemes, Startup India Scheme also involves a certain administrative process and documentation. Given below are few steps taken by the Government to simplify the process:
Startup India hubs are set up by the Government of India in various places where all the works related to incorporation, registration, grievance handling, etc. are done.
The government has both the physical and an online portal for the application process to be initiated. With the registration process, acquiring Patents is faster.
Any startup is allowed to wrap its operation or business within 90 days of its inception. This was rolled out further to the Insolvency and Bankruptcy Bill passed in 2015 meant to facilitate fast winding up companies.
Financial Support
One of the most important factors of the scheme is that the government provides various financial aids to applicants to ensure they are motivated. Let’s discuss some of the few steps taken by the Government to do so.
The government of India has set up a fund with a corpus of 2,500 crores for 4 years which sums up to 10,000 crores. These funds facilitate investment for startups. Some special funds are also designed to cater to tax exemption from income tax and capital gains. These tax-exempts are made available only up to 3 years from the period of inception. Some exclusions applied to the scheme are the investment made by venture capitalists and incubators; they are not allowed to apply for the provisions set forth by the scheme.
Benefits of Startup India
Financial Benefits
The Government of India provides an 80% rebate on the patent cost incurred by the startup company. Most often, startups have unique products or services, these require patenting. Under the startup scheme, the registration of these patents is relatively faster.
Income Tax Benefits
The tax exemption is one of the biggest reliefs companies are allowed to avail. However, these exemptions are available only up to 3 years from the period of incorporation. Further by investing in some specialized funds, the companies can claim an exemption for tax on Capital Gains. The Inter-Ministerial Board validates all startups and grants eligibility for tax benefits by the startup scheme by issuing a certificate.
Registration Benefits
Generally, it is believed that the registration process is tedious and involves a lot of administrative processes back and forth to be done. Hence, as discussed earlier, the government of India has set up various Startup Hubs that facilitate a time meeting for the application, registration and grievances.
Government Tenders
Government tenders are widely opted for by entrepreneurs as passing through a Government tender will bring in a large volume of business and involves big money. These tenders are usually hard to acquire. However, under the current scheme, the startups are given priority even though they do not have any prior experience in handling Government tender or large volumes.
Huge Networking Opportunities
Exposure, word of mouth marketing and reputation are dependent on how many people know about your startup and how many startups you are associated with. This sounds like a process that might happen along the way of the business. This scheme brings all platforms under one roof twice a year and organizes start-up fests which allow the companies to develop their network and opens doorways to new markets and collaborations.
Apart from the above-discussed benefits, one other important benefit is that the scheme also provides Intellectual property rights protection and conducts many activities to spread the awareness of the same. Furthermore, the government of India continues to enhance the benefits at different levels as it evolves.
FAQs on Startup India Scheme: Objectives and Benefits
1. What is the Startup India Scheme?
The Startup India Scheme is a flagship initiative launched by the Government of India on January 16, 2016. Its primary purpose is to build a strong ecosystem for nurturing innovation and entrepreneurship in the country. The scheme aims to drive sustainable economic growth and generate large-scale employment opportunities by empowering startups.
2. What are the main objectives of the Startup India Scheme?
The core objectives of the Startup India Scheme are designed to create a conducive environment for new businesses. Key objectives include:
Simplification and Handholding: To simplify complex government procedures and provide support through a single point of contact for startups.
Funding Support and Incentives: To provide financial support through a designated corpus fund and offer various tax exemptions to eligible entities.
Industry-Academia Partnership and Incubation: To foster collaboration between educational institutions and the corporate sector to create a robust support network and incubation centres for new ventures.
3. What are the key benefits for a startup registered under this scheme?
Registered startups receive several significant benefits, which include:
Tax Exemptions: Income tax exemption for a period of 3 consecutive years and exemption from capital gains tax on specific investments.
Easy Winding Up: A fast-track process under the Insolvency and Bankruptcy Code, 2016, that allows a startup to be wound up within 90 days.
Self-Certification: Freedom from inspections under various labour and environmental laws through a self-declaration-based compliance system for the first 3 to 5 years.
Patent and IPR Benefits: Fast-tracked patent applications and an 80% rebate on filing fees to protect their intellectual property.
4. Who is eligible to be recognised as a 'startup' under this scheme?
To be eligible for recognition under the Startup India scheme, an entity must meet the following criteria as per the 2025-26 guidelines:
It must be incorporated as a Private Limited Company, a Registered Partnership Firm, or a Limited Liability Partnership (LLP).
Its turnover for any financial year since incorporation has not exceeded ₹100 crore.
The entity should be working towards innovation, development, or improvement of products, processes, or services, or have a scalable business model with high potential for employment generation or wealth creation.
It should not have been formed by splitting up or reconstructing an already existing business.
5. How does the Startup India Seed Fund Scheme (SISFS) support early-stage startups?
The Startup India Seed Fund Scheme (SISFS) provides crucial financial assistance to eligible startups for proof of concept, prototype development, product trials, market entry, and commercialisation. It operates through a network of approved incubators across India, which disburse the funds to selected startups. This seed funding helps startups survive the early, high-risk stages before they can attract funding from angel investors or venture capitalists.
6. What is the government's role in implementing the Startup India initiative?
The government's role is that of a facilitator and enabler. It sets up policies, provides legal and financial frameworks, and creates platforms for networking and growth. Key roles include:
Creating a simplified regulatory environment (e.g., self-certification).
Establishing a Fund of Funds to help finance startups indirectly through Venture Capital funds.
Partnering with academic institutions to build incubation centres.
Running the Startup India Hub, a digital platform for all stakeholders in the startup ecosystem.
7. How does the 'Ease of Doing Business' objective translate into practical benefits for a new entrepreneur?
The 'Ease of Doing Business' objective provides tangible, day-to-day advantages. For an entrepreneur, this means less time and money spent on bureaucratic hurdles and more focus on the core business. Practical benefits include a simple online registration process via a mobile app or portal, the ability to self-certify compliance with certain laws instead of facing inspections, and a faster, less cumbersome process for closing the business if it fails, which reduces personal financial risk.
8. Besides financial incentives, what are the most significant non-monetary benefits of the Startup India scheme?
While financial incentives are attractive, the most significant non-monetary benefits focus on ecosystem and network building. These include unparalleled networking opportunities with investors, mentors, and other entrepreneurs through government-organised events. Furthermore, gaining recognition as a 'Startup India' entity adds credibility and can help in attracting talent, securing partnerships, and gaining access to government and corporate projects.
9. Is the Startup India Scheme only for tech-based companies, or can startups in other sectors benefit?
No, this is a common misconception. The Startup India Scheme is sector-agnostic and supports innovation in any field. An entity is eligible as long as it is working on innovation or improvement of products, processes, or services with a scalable business model. This includes startups in sectors like agriculture, healthcare, manufacturing, education, and social services, not just information technology.
10. How does self-certification under the Startup India Scheme reduce the regulatory burden on new companies?
Self-certification significantly reduces the regulatory burden by trusting the entrepreneur to comply with specific laws without mandatory government inspections. For the first three to five years, startups can self-certify their compliance with six labour laws and three environmental laws. This saves them from the time-consuming and often intimidating process of physical inspections by officials, allowing them to operate with greater autonomy and focus their limited resources on growth.
