‏إظهار الرسائل ذات التسميات Department of Industrial Policy and Promotion. إظهار كافة الرسائل
‏إظهار الرسائل ذات التسميات Department of Industrial Policy and Promotion. إظهار كافة الرسائل

Indian Govt wants Tech Giants Google, Amazon and Facebook to Provide Source Code and algorithms

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India’s government is working on a policy which include tough rule that will require tech giants like Google, Amazon and Facebook to provide source code and algorithms, said a report by Bloomberg.





The proposed rules aims to build a wall against unfair monopolistic practices and create a more competitive business environment for local businesses.





The proposed 15-page policy draft (as seen by Bloomberg), prepared by DPIIT, includes a mandate that allows government to access online companies’ source codes and algorithms, which the ministry of commerce says would help ensure against “digitally induced biases” by competitors.





The proposed draft also talks of ascertaining whether e-commerce businesses have “explainable AI,” referring to the use of artificial intelligence.





The draft further states - "There’s a tendency among some of the leading companies to exercise control over most of the information repository"





E-commerce companies will be required to make data available to the government within 72 hours, which could include information related to national security, taxation and law and order, the proposed draft said.





The report by Bloomberg states that -- for at least last two years the government of India has been working on the e-commerce policy in order to fulfill calls of local businesses/startups, wherein they wants to reduce the dominance of global tech giants like Amazon, Google and Facebook.





Notably, in the previous drafts the data localization was the primary point but it got criticism for being insensitive towards local startups and businesses. Surprisingly, the new draft leaves the question -- as which e-commerce platforms would have to keep data locally -- unanswered.


672 Startups given 'Angel Tax' Exemption by CBDT, Says DPIIT Secretary

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672 startups have been given exemption with respect to investments under section 56(2)(viib) of the Income-tax act 1961, or commonly known as angel tax, by the Central Board of Direct Taxes (CBDT) so far.





Till the end of last month, 541 startups were granted exemption, said an another tweet by Ramesh Abhishek last month.

Introduced in finance budget of 2012-13, the controversial angel tax was established to curb money laundering via small startups, that have received equity infusion in excess of the fair valuation, with the premium being paid by investors as their income that have capital in exchange of equity shares at a price over and above the fair valuation of the shares sold even as the premium has to be being paid by investors considered as income and hence has been called as angel tax as the amount taxed is usually on angel investment in startups.

DPIIT is working on a definition of 'accredited investors', who could be provided tax incentives for investments in startups. The department has prepared a draft definition of these accredited investors, which can include trusts, individuals, family member of a startup and unlisted companies and these defined investors may get exemption from angel tax under Section 56(2)(viib) of Income Tax Act, 1961, beyond the Rs 25 crore limit.

In addition, as part of 'Startup India Vision 2024', DPIIT has also proposed relaxation in the income tax laws, for startup entrepreneurs or founders, pertaining sale of residential properties and carrying forward of losses, wherein capital gain on transfer of residential property not to be charged in certain cases.

Govt Plans New ₹1000 Crore Startup Fund for Startups in Priority Areas

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The Department for Promotion of Industry and Internal Trade (DPIIT, formerly DIPP) has made a recommendations to promote startup culture in India and in same DPIIT has proposed to set up an India Startup Fund of ₹ 1,000 crore (~ US$ 143.5 Million) corpus initially, which will be used for making investments in startups working in Priority Areas such as -- rural healthcare, water and waste management, clean energy solutions, cyber security and drones, reported Economics Times.

The proposed fund will be separate from the 10,000 Crore Fund of Funds for Startups (FFS), which was set up in 2016 under the Small Industries Development Bank of India (SIDBI).

"The government wants to offer seed funds for high-tech, cutting edge startups. The proposal is to provide seed funds to 5,000 startups in priority areas," said an Economic Times report citing senior government official aware of the proposal by DPIIT.

Besides investing in cutting-edge startups in priority areas, the proposal also mentions to include startups working in other technologies like Internet of Things (IoT) and artificial intelligence (AI).

With top to down flow of capital, the existing ₹10,000 crore FFS, through SIDBI, invests in venture capital and Alternative Investment Funds (AIFs) that in turn invest in startups. These AIFs were selected by SIDBI based on a number of criteria, with the primary one being that the selected ones will have to would to invest more than 50% of the corpus allocated to them in SMBs.

In a new and separate plan, the DPIIT has recommended regulatory changes aimed at promoting venture capital and angel investments, especially from Indian investors.

The proposed changes would be in addition to those announced earlier in February, which was to allow investors and entrepreneurs get breather from the so-called angel tax. The government increased the exemption threshold and kept investments by listed companies of certain minimum size, venture capital funds and non-residents in startups outside the ambit of the tax to bring relief to companies registered as startups with the department.

Earlier this month, www.indianweb2.com reported that as part of 'Startup India Vision 2024', DPIIT has proposed relaxation in the income tax laws pertaining to sale of residential properties and carrying forward of losses in order to promote growth of budding entrepreneurs and startup founders, who face difficulty in raising capital.

It may be recalled that in April last year, DPIIT had shown it unhappiness to SIDBI for slow disbusement of Startup FFS and till that time, only Rs 600 crore of these Rs 10,000 crore have been sanctioned and a meagre sum of Rs 5.66 crore had reached just to one new venture.

In February 2017, SIDBI allocated Rs 110 crore from the 2016 announced Rs 10,000-crore ‘fund of funds’ for startups, to four venture capital funds, namely Orios Venture Partners Fund II, Kae Capital, and two little known funds, Saha Trust and Kitven Fund III.

DIPP Launches 3-Months Acceleration Programme for Startups in Energy Sector

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To offer offer a unique lab-to-market opportunity for Indian startups in Energy sector, 'Invest India', a government of India’s official investment promotion agency, has joined hands with energy companies to offer its three-month programme for startups in the sector, announced department of industrial policy and promotion (DIPP), which funds Invest India.

Called as "Integrate to Innovate", the programme is a 3-month corporate acceleration programme for energy startups housed at the corporate premises.

The programme aims to provides startups and entrepreneurs an opportunity for collaboration and conversation around valuable energy transitions, offering startups an opportunity to bring their ideas to life with the guidance and support from corporates.

Interested startups and entrepreneurs can enroll for programme by Applying at Startup India Hub Here.

The last date to apply for the programme is -- August 10, 2018.

Selected Startups get a chance to pitch to a corporate panel and subsequently, the selected startups undergo a 3 month incubation at the corporate premises.

The programme provides an opportunity for collaboration and conversation around valuable energy transitions, offering startups an opportunity to bring their ideas to life with the guidance and support from corporates.

The selected startups will receive a cash prize grant of up to ₹ 5 Lakh per startup along with an opportunity to pilot their product with corporates. The corporates would offer them access to technology, technical and commercial mentorship and access to potential customers through the corporate network of partners.

Entries are invited from innovators across various stages of the energy life-cycle—generation, transmission and distribution, storage and consumption—in multiple sectors such as households, farm, industry, infrastructure, building, utility and transport. The winners will be assessed on select parameters such as the breakthrough nature of the innovation, business viability and scalability potential.

SIDBI Commits ₹200 Crore Under Fund of Funds To 4 AIFs to Help Startup Funding

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The Small Industries Development Bank of India (SIDBI) has committed Rs 200 crore under the Government of India's Fund of Funds Scheme (FFS) to four alternative investment funds (AIFs) -- Omnivore Partners India Fund 2, TVS Shriram Growth Fund 3, IQ Alpha III, and Capaleph Indian Millennium SME Fund, according to a tweet by SIDBI's official twitter handle, made on Friday.




No further information has been dispelled by SIDBI; not even any official press release from either SIDBI or the Department of Industrial Policy and Promotion (DIPP).

In January 2016, The Government of India estabilished Fund of Funds Scheme (FFS) when in January 2016 the govt. announced it ambitious Startup Action Plan. The FFS was established with a corpus of Rs.10,000 crore, which is to be managed by SIDBI for contribution to various Alternative Investment Funds (AIFs).

This year in April, in an internal mismanage DIPP has blamed its fund manager SIDBI for slow pace of disbursement to startups. Thereafter in following month, DIPP has undertaken before a Parliamentary panel that it will not make any releases to fund manager SIDBI during FY-2018 and FY-2019, due to unspent balances and poor offtake under FFS scheme.

DIPP itself was criticized when a report by a Parliamentary Standing Committee on Commerce said that the DIPP could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of 'Start-Up India' scheme in 2017-18.

SIDBI has so far committed about Rs 1,135 crore to 27 local venture capital funds (leaving the four recent ones) under the FFS scheme, of which Rs 141 crore —only about 11 per cent — has been disbursed to these funds till April 2018.
Sidbi had also committed Rs 200 crore under the scheme to three AIFs namely Bharat Innovation Fund, JM Financial Fund II and North Eastern Venture Fund in January this year. Earlier, Sidbi had backed funds such as Pi Ventures, Unicorn India Ventures Fund I, Ankur Capital Stellaris Fund, Menterra Social Impact Fund I and Endiya Seed Co-Creation Fund besides others.

Sidbi is also operating various other fund of funds programmes by investing in MSMEs and start-ups – India Aspiration Fund (IAF) launched formally by Finance Minister Arun Jaitley in August 2015, ASPIRE Fund focused on agri and rural enterprises launched by Jaitley for MSME in 2016, and Rs 200 crore on behalf of LIC.

In May of this year, Bangalore-based retail technology startup Mobisy received funding of Rs 24 crores led by SIDBI Venture Capital Limited (SVCL), a venture capital arm of SIDBI specializing direct and fund of funds.

Omnivore Partners had hit the first close of its second fund, Omnivore Partners India Fund 2, at $46 million with investments from KfW, Sidbi, the Dutch Good Growth Fund, The Rockefeller Foundation, Ceniarth, RBL Bank and the Sorenson Impact Foundation. Omnivore targets to raise a total of $75 million in the second fund and hopes to complete the fund raising by August, it announced on February.

References - DealStreetAsia | SIDBI FFS

SIDBI Commits ₹200 Crore Under Fund of Funds To 4 AIFs to Help Startup Funding

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The Small Industries Development Bank of India (SIDBI) has committed Rs 200 crore under the Government of India's Fund of Funds Scheme (FFS) to four alternative investment funds (AIFs) -- Omnivore Partners India Fund 2, TVS Shriram Growth Fund 3, IQ Alpha III, and Capaleph Indian Millennium SME Fund, according to a tweet by SIDBI's official twitter handle, made on Friday.




No further information has been dispelled by SIDBI; not even any official press release from either SIDBI or the Department of Industrial Policy and Promotion (DIPP).

In January 2016, The Government of India estabilished Fund of Funds Scheme (FFS) when in January 2016 the govt. announced it ambitious Startup Action Plan. The FFS was established with a corpus of Rs.10,000 crore, which is to be managed by SIDBI for contribution to various Alternative Investment Funds (AIFs).

This year in April, in an internal mismanage DIPP has blamed its fund manager SIDBI for slow pace of disbursement to startups. Thereafter in following month, DIPP has undertaken before a Parliamentary panel that it will not make any releases to fund manager SIDBI during FY-2018 and FY-2019, due to unspent balances and poor offtake under FFS scheme.

DIPP itself was criticized when a report by a Parliamentary Standing Committee on Commerce said that the DIPP could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of 'Start-Up India' scheme in 2017-18.

SIDBI has so far committed about Rs 1,135 crore to 27 local venture capital funds (leaving the four recent ones) under the FFS scheme, of which Rs 141 crore —only about 11 per cent — has been disbursed to these funds till April 2018.
Sidbi had also committed Rs 200 crore under the scheme to three AIFs namely Bharat Innovation Fund, JM Financial Fund II and North Eastern Venture Fund in January this year. Earlier, Sidbi had backed funds such as Pi Ventures, Unicorn India Ventures Fund I, Ankur Capital Stellaris Fund, Menterra Social Impact Fund I and Endiya Seed Co-Creation Fund besides others.

Sidbi is also operating various other fund of funds programmes by investing in MSMEs and start-ups – India Aspiration Fund (IAF) launched formally by Finance Minister Arun Jaitley in August 2015, ASPIRE Fund focused on agri and rural enterprises launched by Jaitley for MSME in 2016, and Rs 200 crore on behalf of LIC.

In May of this year, Bangalore-based retail technology startup Mobisy received funding of Rs 24 crores led by SIDBI Venture Capital Limited (SVCL), a venture capital arm of SIDBI specializing direct and fund of funds.

Omnivore Partners had hit the first close of its second fund, Omnivore Partners India Fund 2, at $46 million with investments from KfW, Sidbi, the Dutch Good Growth Fund, The Rockefeller Foundation, Ceniarth, RBL Bank and the Sorenson Impact Foundation. Omnivore targets to raise a total of $75 million in the second fund and hopes to complete the fund raising by August, it announced on February.

References - DealStreetAsia | SIDBI FFS

Govt Issues Guidelines To Encourage Startups Undertake Weapon & Military Development Projects

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India's defence ministry has issued new rules for homegrown startups to take part in military projects in an attempt to encourage Indian startups undertake research projects to develop or upgrade weapon systems and in turn reduce imports in this field.

Under the new rules, startups recognised by the Department of Industrial Policy & Promotion (DIPP) under certain categories will automatically qualify to take part in specified defence projects. These categories range from aeronautics, nanotechnology and Virtual Reality to renewable technology, robotics, green technology and internet of things.

Between 2012 and 2016, India accounted for 13% of global arms & weapons imports and has been spending worth nearly $3.5 billion to boost its ageing Soviet era military equipment.

According to an ET report, the government has simplified rules for relatively smaller research and development projects has kept the project open to all Indian companies. It has done away with any regulations for participation.

“For projects with estimated cost of prototype development phase not exceeding Rs 3 crore, no separate technical or financial criteria (will) be defined for both ‘start-ups’ and ‘other than startups’, to encourage their participation,” the new rules specify.

With these rules specified, the three services will now shortlist projects that can be awarded under the category. The Army, Air Force and Navy have already identified 53 projects that can be taken up on priority under the rules. These include Maneuverable Expendable Aerial Targets (MEAT) for Army Air Defence, light weight body armour, a robotic surveillance platform, diesel engines for boats, limpet mines, air to ground rockets and long range glide bombs.

Also Read - India Wasting Money on Defence Budget While Future of War is Artificial Intelligence, Says Pakistan's Ex-Vice Admiral

Notably, the production of Indian defence equipments prior to 2011 was completely in the hands of the Government of India until in 2016 it opened up the Foreign direct investment (FDI) to 49% from the existing 26%.

New Defence Procurement Procedure (DPP) 2016 has a focus on achieving the "Make in India" vision by according topmost priority to 'Buy Indian - IDDM (Indian Designed, Developed and Manufactured)' and 'Buy (Indian)' categories.

There are several Indian startups & SMEs that cater to the Defense industry by supplying sub-assemblies and components and providing services like system integration. Under the Make in India initiative, these organizations are set to enhance their manufacturing and development efficiency, thereby contributing to making India self-reliant in defense production. Some of the system Integrators catering to the Defense sector in India are Mistral Solutions, Alpha Designs, Astra Microwave and SLN Technologies among others.

Also Read - Indian Defence Research Orgnization Boast To Develop Invisible Airplane

Numerous startups working in Medtech, artificial intelligence and Virtual reality/Augmented Reality are even helping Indian army and defence personnels.

In January this year, Axio Biosolutions, a medtech startup offering medical innovation very useful for soldiers, raised USD 7.4 million funding in Series B round from Ratan Tata's RNT Capital, which will be used for expansion to new markets, and development of high-impact medical products

Also, to recall, India has recently joined hands with Japan to launch robotics and artificial intelligence in the defence segment.

Via - Economic Times | Wikipedia |

[Top Image - disa-india.org]

Govt Issues Guidelines To Encourage Startups Undertake Weapon & Military Development Projects

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India's defence ministry has issued new rules for homegrown startups to take part in military projects in an attempt to encourage Indian startups undertake research projects to develop or upgrade weapon systems and in turn reduce imports in this field.

Under the new rules, startups recognised by the Department of Industrial Policy & Promotion (DIPP) under certain categories will automatically qualify to take part in specified defence projects. These categories range from aeronautics, nanotechnology and Virtual Reality to renewable technology, robotics, green technology and internet of things.

Between 2012 and 2016, India accounted for 13% of global arms & weapons imports and has been spending worth nearly $3.5 billion to boost its ageing Soviet era military equipment.

According to an ET report, the government has simplified rules for relatively smaller research and development projects has kept the project open to all Indian companies. It has done away with any regulations for participation.

“For projects with estimated cost of prototype development phase not exceeding Rs 3 crore, no separate technical or financial criteria (will) be defined for both ‘start-ups’ and ‘other than startups’, to encourage their participation,” the new rules specify.

With these rules specified, the three services will now shortlist projects that can be awarded under the category. The Army, Air Force and Navy have already identified 53 projects that can be taken up on priority under the rules. These include Maneuverable Expendable Aerial Targets (MEAT) for Army Air Defence, light weight body armour, a robotic surveillance platform, diesel engines for boats, limpet mines, air to ground rockets and long range glide bombs.

Also Read - India Wasting Money on Defence Budget While Future of War is Artificial Intelligence, Says Pakistan's Ex-Vice Admiral

Notably, the production of Indian defence equipments prior to 2011 was completely in the hands of the Government of India until in 2016 it opened up the Foreign direct investment (FDI) to 49% from the existing 26%.

New Defence Procurement Procedure (DPP) 2016 has a focus on achieving the "Make in India" vision by according topmost priority to 'Buy Indian - IDDM (Indian Designed, Developed and Manufactured)' and 'Buy (Indian)' categories.

There are several Indian startups & SMEs that cater to the Defense industry by supplying sub-assemblies and components and providing services like system integration. Under the Make in India initiative, these organizations are set to enhance their manufacturing and development efficiency, thereby contributing to making India self-reliant in defense production. Some of the system Integrators catering to the Defense sector in India are Mistral Solutions, Alpha Designs, Astra Microwave and SLN Technologies among others.

Also Read - Indian Defence Research Orgnization Boast To Develop Invisible Airplane

Numerous startups working in Medtech, artificial intelligence and Virtual reality/Augmented Reality are even helping Indian army and defence personnels.

In January this year, Axio Biosolutions, a medtech startup offering medical innovation very useful for soldiers, raised USD 7.4 million funding in Series B round from Ratan Tata's RNT Capital, which will be used for expansion to new markets, and development of high-impact medical products

Also, to recall, India has recently joined hands with Japan to launch robotics and artificial intelligence in the defence segment.

Via - Economic Times | Wikipedia |

[Top Image - disa-india.org]

Amid Slow Startup Funding, DIPP Stops Fund Releases To SIDBI Till FY19

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Indian government’s Rs 10,000-crore Fund-of-Funds for Start-ups (FFS) -- launched 28 months ago as part of the 'Start-up India' Action Plan to boost startups in the country -- is struggling to perform any better with poor offtake of funds, which are supposed to routed to startups in the country. The Department of Industrial Policy and Promotion (DIPP) has already blamed its fund manager Small Industries Development Bank of India (SIDBI) for slow pace of disbursement to startups.

To recall, last month, a report by a Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of 'Start-Up India' scheme in 2017-18. Prior to this, it was reported that on Feb 6, only 99 startups have been funded as compared with a total of 6,981 startups recognised by the DIPP.

SIDBI has so far committed Rs 1,285 crore to 27 local venture capital funds under the FFS scheme, of which Rs 141 crore —only about 11 per cent — has been disbursed to these funds till April 2018.

In the consequence of poor offtake under FFS scheme, DIPP is learnt to have undertaken before a Parliamentary panel that it will not make any releases to fund manager SIDBI during FY18 and FY19, due to unspent balances. The decision to impose restriction of funding to the state-owned SIDBI, which manages the FFS and acts as a limited partner in these venture capital funds (also called Alternate Investment Funds or AIFs) that draw capital from the FFS, has been taken by DIPP citing “unspent balance”.

So far, Rs 600 crore has been released by the DIPP to SIDBI, of which Rs 500 crore was released in FY'16 and Rs 100 crore in FY'17.

Under the FFS scheme, the money is routed to startup entities via participating AIFs. SIDBI makes contributions to AIFs that vary between 10 and 20 percent of the target corpus of each AIF while the balance 80-90 percent funds are raised from other contributors for investing in equity and equity-linked instruments of startups. Of the Rs 141 crore disbursed to early-stage ventures till end-April, some 124 start-ups have been reported as beneficiaries.

In a response to DIPP’s undertaking before the House panel that “no releases” of funds is expected during 2017-18 and 2018-19, SIDBI said that alongside the Rs 600 crore that it has received from DIPP so far, it has also got an assurance letter authorizing it “to make further commitments of Rs 1,600 crore to AIFs”.

On the actual withdrawls of funds by AIFs, SIDBI said, "The decisions are entirely on the investment managers of the Funds and SIDBI has little say in their decisions. The disbursements to the AIFs are based on their request for investment in investee companies".

On the slow disbursement of funds (via DIPP) to startups, SIDBI has clarified to Indian Express, saying that, “the funding dynamics of venture capital industry.. is very much different from the normal lending. Under FFS of Rs 10,000 crore, which is a 10-year programme (2 financial cycles of 5 years each) funds are routed to startup entities through AIFs (venture capital funds). SIDBI makes contributions to AIFs which generally vary from 10 – 20 per cent of target corpus of each AIF. Balance 80-90 per cent funds are raised from other contributors (Limited Partners) and an AIF normally takes 1-2 years to raise the targeted corpus of the Fund. After raising the funds AIFs have a window of 4-5 years to find support-worthy start-up deals and to make investment commitments to them. Therefore, actual flow of funds from AIFs to start-up entities may take up to 3-5 years from the time they start raising funds and it is entirely up to the investment managers of these AIFs to select suitable deals and release funds to their selected start-ups which are normally milestone based without any influence of contributors to fund."

The 27 AIFs that have received funds from SIDBI include Mumbai-based early-stage investor Kae Capital and Saha Fund, a venture capital fund focused on women entrepreneurs.

Kae Capital has investments in about 16 startups, including Truebil, a used-car marketplace owned by Paix Technology; peer-to-peer business loan marketplace startup Loanzen; second-hand products marketplace ListUp promoted by Gijutsu Solutions and shopping portal Fynd run by Shopsense Retail Technologies.

Saha Fund’s investment targets include including fitness application Fitternity, online food platform InnerChef and women’s garment venture Kaaryah. Some of the other AIFs are Mumbai-based Orios Venture Partners, early-stage investor Unicorn India Ventures, Ideaspring Capital, Pi Ventures and Stellaris Venture Partners.

SIDBI however said that it expects actual disbursement of another Rs 400-450 crore out of the committed amount to AIFs during the balance period of FY19.

Via - Indian Express | Top Image - PxHere.com

Startup Fund of Funds: DIPP Unhappy with SIDBI For Slow Pace of Disbursement

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Earlier this month, a report by a Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. Prior to this, it was reported that on Feb 6, only 99 startups have been funded as compared with a total of 6,981 startups recognised by the DIPP.

Now, as the committee's report questioned DIPP for this poor utilization of funds, DIPP in turn is now blaming Small Industries Development Bank of India (SIDBI) for slow pace of disbursement to startups.

According to Indian Express report -- citing a government official, DIPP has been repeatedly asking SIDBI for the past one year to consider steps imperative to increase off-take of funds. DIPP has asked SIDBI to take necessary actions such as change in the manner funds are disbursed so that the funds are disbursed at much faster pace.

According to a senior government official cited in the report, "For the past one year, in all the meetings of the monitoring committee for the Startup India scheme, we have been asking SIDBI to consider taking steps that can increase offtake of funds. The previous monitoring committee meeting took place on December 4 last year where it was suggested that SIDBI should consider changing the manner and methods in which they are disbursing the amount under the scheme, so that a greater offtake can take place."

At first -- it was reported on March 31 2017 that only Rs 33.63 crore was disbursed to 62 startups. DIPP then expressed that there's an improvement in the allocation and disbursement, and on April this year, it said that this year SIDBI has committed Rs 1,136 crore to 25 venture capital (VC) funds, who, in turn, have invested Rs 569 crore in 120 startups.

"A significant amount of disbursement to startups has been done in the past couple of months after feedback was taken from VC funds on lower offtake. The DIPP has set targets to facilitate and support 1000 startups by March 2019", added the official.

However, last month, the Parliamentary Standing Committee on Commerce expressed concerns about the “huge gap” that exists between the number of startups that have received funding and tax exemptions and the number of startups that have been officially recognised.

Asking the DIPP to furnish reasons for the lag in funding recognised startups, the committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs”.

Moreover, a meeting held in December last year by Startup India scheme's monitoring committee stated that DIPP expressed concern at the under-utilisation and slow pace of disbursement of funds. The committee also suggested that SIDBI should consider changing the manner and methods in which they are disbursing the amount under the scheme, so that a greater offtake can take place.

The minutes of meeting of the monitoring committee also mentioned that, “DIPP asked SIDBI to highlight challenges and consider steps (change in the manner of utilization) that could be taken to allow greater offtake of funds.”

Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed that the much hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.

The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 start-ups in 2 years.

[Top Image - Source]

Startup Fund of Funds: DIPP Unhappy with SIDBI For Slow Pace of Disbursement

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Earlier this month, a report by a Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only 0.4% of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. Prior to this, it was reported that on Feb 6, only 99 startups have been funded as compared with a total of 6,981 startups recognised by the DIPP.

Now, as the committee's report questioned DIPP for this poor utilization of funds, DIPP in turn is now blaming Small Industries Development Bank of India (SIDBI) for slow pace of disbursement to startups.

According to Indian Express report -- citing a government official, DIPP has been repeatedly asking SIDBI for the past one year to consider steps imperative to increase off-take of funds. DIPP has asked SIDBI to take necessary actions such as change in the manner funds are disbursed so that the funds are disbursed at much faster pace.

According to a senior government official cited in the report, "For the past one year, in all the meetings of the monitoring committee for the Startup India scheme, we have been asking SIDBI to consider taking steps that can increase offtake of funds. The previous monitoring committee meeting took place on December 4 last year where it was suggested that SIDBI should consider changing the manner and methods in which they are disbursing the amount under the scheme, so that a greater offtake can take place."

At first -- it was reported on March 31 2017 that only Rs 33.63 crore was disbursed to 62 startups. DIPP then expressed that there's an improvement in the allocation and disbursement, and on April this year, it said that this year SIDBI has committed Rs 1,136 crore to 25 venture capital (VC) funds, who, in turn, have invested Rs 569 crore in 120 startups.

"A significant amount of disbursement to startups has been done in the past couple of months after feedback was taken from VC funds on lower offtake. The DIPP has set targets to facilitate and support 1000 startups by March 2019", added the official.

However, last month, the Parliamentary Standing Committee on Commerce expressed concerns about the “huge gap” that exists between the number of startups that have received funding and tax exemptions and the number of startups that have been officially recognised.

Asking the DIPP to furnish reasons for the lag in funding recognised startups, the committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs”.

Moreover, a meeting held in December last year by Startup India scheme's monitoring committee stated that DIPP expressed concern at the under-utilisation and slow pace of disbursement of funds. The committee also suggested that SIDBI should consider changing the manner and methods in which they are disbursing the amount under the scheme, so that a greater offtake can take place.

The minutes of meeting of the monitoring committee also mentioned that, “DIPP asked SIDBI to highlight challenges and consider steps (change in the manner of utilization) that could be taken to allow greater offtake of funds.”

Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed that the much hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.

The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 start-ups in 2 years.

[Top Image - Source]

Finally, DIPP Changes Definition for 'Start-ups' in India, Here's All You Need To Know

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Department of Industrial Policy and Promotion (DIPP), under the Union Ministry for Commerce and Industry, has come out with a new notification on definition of start-ups. Notably, this is the second time DIPP has made changes in the definition of Startup. Earlier in May 2017, DIPP has made minor changes wherein an entity would be recognized as a startup up to seven years instead of the previous five years rule.

According to the fresh DIPP notification, "An entity shall be considered as a start-up up to a period of seven years from the date of incorporation/registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under Sction 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India".

In the case of start-ups in the biotechnology sector (including medical device), the period shall be up to ten years from the date of its incorporation/ registration. In March of last year, DIPP has moved a cabinet note and suggestion that the maximum age for classifying a biotechnology or a medical devices firm as a startup be raised to 8-10 years from the current five years.

The increase in the age of Biotechnology and Medical Devices companies to consider as startups is made on the very fact that the companies in these two sectors take long development process to mature.

The notification also said that the turnover of the entity for any of the financial years since incorporation/ registration should not exceed ₹25 crore.

The definition also said that the entity should be working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation. However, an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘start-up’.

Notably, last month DIPP has cancelled certifications of companies which have been earlier recognized as 'Start-ups' but misusing the Start-up India initiative as these are actually subsidiaries of existing Indian or foreign companies.

“An entity shall 'cease' to be a start-up on completion of seven years from the date of its incorporation/ registration or if its turnover for any previous year exceeds ₹ 25 crore. In respect of start-ups in the biotechnology sector, an entity shall cease to be a start-up on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds ₹ 25 crore ,” it added.

Interestingly, according to above changes Flipkart, which was incorporated in 2007, now cease to be called as a startup -- technically speaking, going by the new definition of startup by DIPP.

A start-up shall make an online application over the mobile app or portal set up by the Department of Industrial Policy and Promotion for recognition, it added.

The notification also said that a start-up being a private limited company or a limited liability partnership incorporated on or after 1st day of April 2016 but before 1st day of April 2021, can claim 100% tax exemption on profits for three out of seven years, as per the prescribed norms.

The notification also provided tax relief for issue of shares by start-ups over the fair market value, with certain conditions.

For availing the tax relief for issue of shares over the fair market value, the aggregate amount of paid-up share capital and share premium of the start-up after the proposed issue of shares should not exceed ₹ 10 crore.

Further, the investor/ proposed investor, who proposed to subscribe to the issue of shares , should either have an average returned income of ₹ 25 lakh or more for the preceding three financial years or net worth of ₹2 crore or more as on the last date of the preceding financial year.

The start-up had to obtain a report from a merchant banker specifying the fair market value of shares in accordance with rules, it said.

The above news was first reported in The Hindu

Finally, DIPP Changes Definition for 'Start-ups' in India, Here's All You Need To Know

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Department of Industrial Policy and Promotion (DIPP), under the Union Ministry for Commerce and Industry, has come out with a new notification on definition of start-ups. Notably, this is the second time DIPP has made changes in the definition of Startup. Earlier in May 2017, DIPP has made minor changes wherein an entity would be recognized as a startup up to seven years instead of the previous five years rule.

According to the fresh DIPP notification, "An entity shall be considered as a start-up up to a period of seven years from the date of incorporation/registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under Sction 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India".

In the case of start-ups in the biotechnology sector (including medical device), the period shall be up to ten years from the date of its incorporation/ registration. In March of last year, DIPP has moved a cabinet note and suggestion that the maximum age for classifying a biotechnology or a medical devices firm as a startup be raised to 8-10 years from the current five years.

The increase in the age of Biotechnology and Medical Devices companies to consider as startups is made on the very fact that the companies in these two sectors take long development process to mature.

The notification also said that the turnover of the entity for any of the financial years since incorporation/ registration should not exceed ₹25 crore.

The definition also said that the entity should be working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation. However, an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘start-up’.

Notably, last month DIPP has cancelled certifications of companies which have been earlier recognized as 'Start-ups' but misusing the Start-up India initiative as these are actually subsidiaries of existing Indian or foreign companies.

“An entity shall 'cease' to be a start-up on completion of seven years from the date of its incorporation/ registration or if its turnover for any previous year exceeds ₹ 25 crore. In respect of start-ups in the biotechnology sector, an entity shall cease to be a start-up on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds ₹ 25 crore ,” it added.

Interestingly, according to above changes Flipkart, which was incorporated in 2007, now cease to be called as a startup -- technically speaking, going by the new definition of startup by DIPP.

A start-up shall make an online application over the mobile app or portal set up by the Department of Industrial Policy and Promotion for recognition, it added.

The notification also said that a start-up being a private limited company or a limited liability partnership incorporated on or after 1st day of April 2016 but before 1st day of April 2021, can claim 100% tax exemption on profits for three out of seven years, as per the prescribed norms.

The notification also provided tax relief for issue of shares by start-ups over the fair market value, with certain conditions.

For availing the tax relief for issue of shares over the fair market value, the aggregate amount of paid-up share capital and share premium of the start-up after the proposed issue of shares should not exceed ₹ 10 crore.

Further, the investor/ proposed investor, who proposed to subscribe to the issue of shares , should either have an average returned income of ₹ 25 lakh or more for the preceding three financial years or net worth of ₹2 crore or more as on the last date of the preceding financial year.

The start-up had to obtain a report from a merchant banker specifying the fair market value of shares in accordance with rules, it said.

The above news was first reported in The Hindu

No Progress in StartUp India Initiative As DIPP Utilized Only 0.4% of Allocated ₹10 Crore for Promotion

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PM Modi's ambitious 'StartUp India' initiative once again got a question mark when a report by the department-related Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only Rs 4 lakh (as on December 31, 2017) out of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. The committee presented its report on March 14.

The Committee expressed concerns about the “huge gap” that exists between the number of startups receiving funding, tax exemptions and the number of such entities that have been recognized. Additionally, the panel observed in its report that, as on February 6, 2018, 6,981 startups have been recognized by the DIPP. Of these startups, only 99 have been funded and 82 have been certified for claiming tax exemptions under the Income Tax Act, 1961.

Asking the DIPP to furnish reasons for the lag in funding recognized startups, the Committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs."

The panel report further said that the proposed Rs 2,000 crore Credit Guarantee Fund for startups, announced in January 2016, is still in the formulation stage and there has been no progress made as the fund has been again allocated a token amount (of Rs 1 lakh) in Budget Estimate of 2018-19,”

The report also said the panel fears that the functioning of the Startup India Hub and call centre was hampered due to low utilization of funds.

The above news was first reported in Indian Express.

Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed that the much hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.

Last month, a report by Entrepreneurship Development Institute of India (EDII) also revealed that only 5% of the country’s people went on to establish their own business or startups, which is among the lowest rates in the world. Moreover, business discontinuation in India is among the highest in the world at 26.4%, said the EDII report.

Also, an another report revealed that in this year's Asia's startup-friendly countries list, India stands at 8th rank behind China and even Malaysia because of the very fact that it is still the poorest country in Asia with GDP per capita of $1,710, in 2017 and a high unemployment rate.

Related Reading - Why India’s Historic Boost to Ease of Doing Business Is A Complete Failure!

The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 start-ups in 2 years.

All this despite of the fact that exactly a year back industry body FICCI, in its report, suggested that startups in India need government support to lesson the number of failures and revealed that startups success rate is not up to the mark in the country. Perhaps, the government didn't take FICCI seriously.

The market valuation of Indian startups has grown significantly but innovation remains the biggest missing piece of the Indian startup puzzle. Last year, a study -- “Entrepreneurial India” -- by the IBM Institute for Business Value and Oxford Economics found that 90% of Indian startups fail within the first five years due to lack of innovation.

To recall, in 2016's G20 digital entrepreneurship survey too India was ranked in bottom 10 in group of 20.

Few days back, industry veteran and former Infosys director TV Mohandas Pai has made a crucial statement concerning Indian startup ecosystem, as he said that 60% of startups in India may fail owing to lack of market and other factors. He, however, also added that all startups have bright future.

No Progress in StartUp India Initiative As DIPP Utilized Only 0.4% of Allocated ₹10 Crore for Promotion

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PM Modi's ambitious 'StartUp India' initiative once again got a question mark when a report by the department-related Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only Rs 4 lakh (as on December 31, 2017) out of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. The committee presented its report on March 14.

The Committee expressed concerns about the “huge gap” that exists between the number of startups receiving funding, tax exemptions and the number of such entities that have been recognized. Additionally, the panel observed in its report that, as on February 6, 2018, 6,981 startups have been recognized by the DIPP. Of these startups, only 99 have been funded and 82 have been certified for claiming tax exemptions under the Income Tax Act, 1961.

Asking the DIPP to furnish reasons for the lag in funding recognized startups, the Committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs."

The panel report further said that the proposed Rs 2,000 crore Credit Guarantee Fund for startups, announced in January 2016, is still in the formulation stage and there has been no progress made as the fund has been again allocated a token amount (of Rs 1 lakh) in Budget Estimate of 2018-19,”

The report also said the panel fears that the functioning of the Startup India Hub and call centre was hampered due to low utilization of funds.

The above news was first reported in Indian Express.

Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed that the much hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.

Last month, a report by Entrepreneurship Development Institute of India (EDII) also revealed that only 5% of the country’s people went on to establish their own business or startups, which is among the lowest rates in the world. Moreover, business discontinuation in India is among the highest in the world at 26.4%, said the EDII report.

Also, an another report revealed that in this year's Asia's startup-friendly countries list, India stands at 8th rank behind China and even Malaysia because of the very fact that it is still the poorest country in Asia with GDP per capita of $1,710, in 2017 and a high unemployment rate.

Related Reading - Why India’s Historic Boost to Ease of Doing Business Is A Complete Failure!

The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 start-ups in 2 years.

All this despite of the fact that exactly a year back industry body FICCI, in its report, suggested that startups in India need government support to lesson the number of failures and revealed that startups success rate is not up to the mark in the country. Perhaps, the government didn't take FICCI seriously.

The market valuation of Indian startups has grown significantly but innovation remains the biggest missing piece of the Indian startup puzzle. Last year, a study -- “Entrepreneurial India” -- by the IBM Institute for Business Value and Oxford Economics found that 90% of Indian startups fail within the first five years due to lack of innovation.

To recall, in 2016's G20 digital entrepreneurship survey too India was ranked in bottom 10 in group of 20.

Few days back, industry veteran and former Infosys director TV Mohandas Pai has made a crucial statement concerning Indian startup ecosystem, as he said that 60% of startups in India may fail owing to lack of market and other factors. He, however, also added that all startups have bright future.

DIPP Cancels 'Start-Up' Certifications of Subsidiaries of Existing Companies Milking Tax Gains

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In what could be seen as fraudulent misuse of government of India's Start-up India initiative introduced in 2016, Department of Industrial Policy & Promotion (DIPP) has cancelled/revoked certifications of companies which have been earlier recognized as 'Start-ups' is actually subsidiaries of existing Indian or foreign companies.

On March 15, the Inter-Ministerial Group (IMG) on Startups held a meeting and revoked the certificates of recognition and certificates of eligibility given to two entities -- Riot Solutions and JVS Flow Control OPC -- as they failed to respond to queries on whether they were subsidiaries of existing companies, as indicated in minutes of meetings.

These two entities were sent queries by the IMG but have not yet responded. So, the IMG decided to revoke the certifications of recognition issued to them. Riot Solutions is based out of Ernakulam, Kerala while JVS Flow Control is based out of Gujarat, as per registrar of companies.

Besides these two, the IMG has also sought clarification from five more entities that it suspects might be subsidiaries of existing companies. It is currently waiting for the response and if the replies are not satisfactory, or if there is no reply, then the IMG will revoke certifications issued to these entities as well.

Notably, this should serve as a warning to others too, who, in order to avail tax benefits, have done this same wrong doing and have not came under the scrutiny yet.

The IMG had earlier observed that certain entities that had sought recognition as start-ups by DIPP were incorporated/registered as subsidiaries of existing Indian or foreign companies. However, as per the notification 501(E) under the reconstruction clause, it states that any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a start-up. Thus, such subsidiaries are ineligible to be recognised as start-ups and will also not be eligible to be considered for tax benefits by the IMB. The certification of registration and certification of eligibility for such an entity that may have been issued earlier now stands cancelled.

“The whole idea behind promoting the start-up culture in the country, which is to encourage individuals to start their own enterprises and get gainfully employed, gets defeated if existing companies try to take advantage of the scheme. That is why the IMB is acting strictly here,” said a government official to a business daily.

Since the Startup India Action Plan was approved by the Centre in 2016, 6,096 entities have been recognised as start-ups by the DIPP and 74 have been approved for tax benefits by IMB, as per government figures up to first week of January 2018.

The above development was first reported in BusinessLine.

To recall, in February government has extended tax holiday/exemption by eligible startups till April 1 2021. Moreover, in last year's budget government had also reduced corporate Tax by 5% for SMEs, startups With turnover less than Rs 50 crore. It is because of these tax gains that companies are incorporating new companies as subsidiaries of existing ones and registering them as startups to gain tax benefits which actually nullifying the aim of PM Modi's ambitious Start-up India initiative.

Additionally, although the IMG is now scrutinizing these companies falsely posing as startups, DIPP must also improvise the procedural guidelines of recognition/ certification of companies as startups as how come these subsidiaries went on to get recognized as startups which they are not while at the same time the new ventures actually started by fresh entrepreneurs are finding it difficult to get recognition as startups.

Besides, there are other companies which are nor a startup nor a subsidiaries of existing ones but still getting full tax exemptions.

Top Image Via - Ankur Rajput @Linkedin

DIPP Cancels 'Start-Up' Certifications of Subsidiaries of Existing Companies Milking Tax Gains

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In what could be seen as fraudulent misuse of government of India's Start-up India initiative introduced in 2016, Department of Industrial Policy & Promotion (DIPP) has cancelled/revoked certifications of companies which have been earlier recognized as 'Start-ups' is actually subsidiaries of existing Indian or foreign companies.

On March 15, the Inter-Ministerial Group (IMG) on Startups held a meeting and revoked the certificates of recognition and certificates of eligibility given to two entities -- Riot Solutions and JVS Flow Control OPC -- as they failed to respond to queries on whether they were subsidiaries of existing companies, as indicated in minutes of meetings.

These two entities were sent queries by the IMG but have not yet responded. So, the IMG decided to revoke the certifications of recognition issued to them. Riot Solutions is based out of Ernakulam, Kerala while JVS Flow Control is based out of Gujarat, as per registrar of companies.

Besides these two, the IMG has also sought clarification from five more entities that it suspects might be subsidiaries of existing companies. It is currently waiting for the response and if the replies are not satisfactory, or if there is no reply, then the IMG will revoke certifications issued to these entities as well.

Notably, this should serve as a warning to others too, who, in order to avail tax benefits, have done this same wrong doing and have not came under the scrutiny yet.

The IMG had earlier observed that certain entities that had sought recognition as start-ups by DIPP were incorporated/registered as subsidiaries of existing Indian or foreign companies. However, as per the notification 501(E) under the reconstruction clause, it states that any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a start-up. Thus, such subsidiaries are ineligible to be recognised as start-ups and will also not be eligible to be considered for tax benefits by the IMB. The certification of registration and certification of eligibility for such an entity that may have been issued earlier now stands cancelled.

“The whole idea behind promoting the start-up culture in the country, which is to encourage individuals to start their own enterprises and get gainfully employed, gets defeated if existing companies try to take advantage of the scheme. That is why the IMB is acting strictly here,” said a government official to a business daily.

Since the Startup India Action Plan was approved by the Centre in 2016, 6,096 entities have been recognised as start-ups by the DIPP and 74 have been approved for tax benefits by IMB, as per government figures up to first week of January 2018.

The above development was first reported in BusinessLine.

To recall, in February government has extended tax holiday/exemption by eligible startups till April 1 2021. Moreover, in last year's budget government had also reduced corporate Tax by 5% for SMEs, startups With turnover less than Rs 50 crore. It is because of these tax gains that companies are incorporating new companies as subsidiaries of existing ones and registering them as startups to gain tax benefits which actually nullifying the aim of PM Modi's ambitious Start-up India initiative.

Additionally, although the IMG is now scrutinizing these companies falsely posing as startups, DIPP must also improvise the procedural guidelines of recognition/ certification of companies as startups as how come these subsidiaries went on to get recognized as startups which they are not while at the same time the new ventures actually started by fresh entrepreneurs are finding it difficult to get recognition as startups.

Besides, there are other companies which are nor a startup nor a subsidiaries of existing ones but still getting full tax exemptions.

Top Image Via - Ankur Rajput @Linkedin

Govt Planning No 'Angel Tax' on Startup Funding Via Recognized Investors

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Despite no clarification given on demon of 'angel tax', that startups still haunts from, new regulations and contemplation are being revealed every passing day.

A day after Budget 2018 was presented, Department of Industrial Policy and Promotion (DIPP) announced that it is making an amendment where startups incorporated before 2016 that have got up to Rs 10 crore in angel funding won’t face the so-called angel tax.

Now, in a latest news coming from a source, government is considering a proposal to exempt investments from recognized angel investor groups in startups from the so-called angel tax.

The news report further stated that, as an additional step concerning angel investments, a committee has been set up under the Securities and Exchange Board of India (SEBI) to form a framework for regulating angel investments.

The 'demon' of so-called angel tax was introduced in Union Budget of 2012 under section 56 (2) (viib) of the Income Tax Act, 1961. This section says that any excess consideration received by a company will be treated as the income of the start-up if it issues shares to a resident at a price which exceeds the fair market value of the shares. The section does not apply if consideration is received from venture capital companies, venture capital funds or a certain class of persons notified by the government. Thus, a startup is required to pay an angel tax at the rate of whopping 30.9% on the capital raised in excess to its fair value.

Thereafter, in past few years, the finance minister has provided exemption from angel tax by excluding investments by non-residents, venture funds, angel funds, and the DIPP-registered startups. Astonishingly though, the startups and Angels of Indian origin are not excluded from taxation.

The latest move of government's new proposal may extend the exemption to angel investors of Indian origin as well.

Prominent angel groups such as Indian Angel Network, Venture Catalysts, AngelList and LetsVenture, among others, are currently presenting proposals to the SEBI panel on the outlines of the regulations regarding angel investments in the country.

To recall, in this year's union budget, it was announced that time for claiming a tax holiday/exemption by eligible startups has been extended till 1-April 2021.

Govt Planning No 'Angel Tax' on Startup Funding Via Recognized Investors

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Despite no clarification given on demon of 'angel tax', that startups still haunts from, new regulations and contemplation are being revealed every passing day.

A day after Budget 2018 was presented, Department of Industrial Policy and Promotion (DIPP) announced that it is making an amendment where startups incorporated before 2016 that have got up to Rs 10 crore in angel funding won’t face the so-called angel tax.

Now, in a latest news coming from a source, government is considering a proposal to exempt investments from recognized angel investor groups in startups from the so-called angel tax.

The news report further stated that, as an additional step concerning angel investments, a committee has been set up under the Securities and Exchange Board of India (SEBI) to form a framework for regulating angel investments.

The 'demon' of so-called angel tax was introduced in Union Budget of 2012 under section 56 (2) (viib) of the Income Tax Act, 1961. This section says that any excess consideration received by a company will be treated as the income of the start-up if it issues shares to a resident at a price which exceeds the fair market value of the shares. The section does not apply if consideration is received from venture capital companies, venture capital funds or a certain class of persons notified by the government. Thus, a startup is required to pay an angel tax at the rate of whopping 30.9% on the capital raised in excess to its fair value.

Thereafter, in past few years, the finance minister has provided exemption from angel tax by excluding investments by non-residents, venture funds, angel funds, and the DIPP-registered startups. Astonishingly though, the startups and Angels of Indian origin are not excluded from taxation.

The latest move of government's new proposal may extend the exemption to angel investors of Indian origin as well.

Prominent angel groups such as Indian Angel Network, Venture Catalysts, AngelList and LetsVenture, among others, are currently presenting proposals to the SEBI panel on the outlines of the regulations regarding angel investments in the country.

To recall, in this year's union budget, it was announced that time for claiming a tax holiday/exemption by eligible startups has been extended till 1-April 2021.

Soon No Angel Tax For Startups Incorporated Before 2016 and Have Got Upto ₹10 Crore Funding

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In order to provide some relief to startups from infamous 'Angel Tax', Department of Industrial Policy and Promotion (DIPP) is making an amendment where startups incorporated before 2016 that have got up to Rs 10 crore in angel funding won't face the so-called angel tax.

The changes in the regime are being finalised by DIPP and it will soon notify about same, reported Economic Times citing a senior government official.

DIPP will also set up a separate committee for the recognition of such startups so that they get the relief from tax imposed on angel funding they get, atleast for pre-2016 startups.

The new amendment, if brought, will ease the concerns of about 300 startups that received funding from the Angel Investors Network. Startups incorporated after 2016 and recognised under the Startup India policy are spared this tax.

At present, the angel tax rate stands at a whopping 30 percent, which according to Nasscom has resulted in a 53 percent drop in angel funding during the first half of 2017.

Startups and investors were expecting that the government will resolve the issue of angel tax in the this year budget of 2018 however the issue was left out completely.

Thereafter, a new clarification by Finance Secretary Hasmukh Adhia stated that genuine cases of startup valuation as assessed by DIPP will be exempt from paying taxes on angel investments received. However, this will also be applicable only for startups founded before 2016.

Last month, a few entrepreneurs started a petition on Change.Org demanding that angel tax be abolished as it ran against the spirit of the Start-up India programme initiated by Prime Minister Narendra Modi.

At the same time, Nasscom, Indian Angel Networking, TiE Mumbai and a few other startup ecosystem players came together and issued a statement for abolishing angel tax. “The investors proposed solution is in line with the government’s innovative idea of startup certification. They proposed that the government recognise and approve angel investor groups, and startups raising monies from these groups be exempted from Section 56, unleashing faster-growing startups [that] create jobs and contribute to the tax collections,” the statement said.

To recall, in this year budget, it was announced that time for claiming a tax holiday/exemption by eligible startups has been extended till April 1 2021.
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