Startups will rejoice: Removing this pain point is government’s biggest agenda

By: | Updated: October 31, 2018 3:22 PM

DIPP is also talking to the Small Industries Development Bank of India (SIDBI) to provide Rs 3,300 crore of capital by March this year to increase the availability of funds for startups in the country.

HoloSuit, augmented reality startup, gets funding from Singapore, India investorsThe Narendra Modi-led government had floated a Rs 10,000 crore funds of funds for startups (FFS) two years ago to meet the funding requirement of startups.

The government is working with the Income Tax department and regulators to simplify the rules and laws for startups, so as to support their growth and entrepreneurship culture in the country, the Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek said Wednesday.

“We are easing regulations for startups. We are also working with the tax department and regulators, and we have been able to simplify 24 regulations so far,” PTI reported citing Ramesh Abhishek, who said that easing regulatory processes and norms is the biggest agenda for the department.

DIPP is also talking to the Small Industries Development Bank of India (SIDBI) to provide Rs 3,300 crore of capital by March this year to increase the availability of funds for startups in the country. “SIDBI has already taken equity in 30 alternate investment funds (AIFs), committing more than Rs 1,500 crore and those funds have raised Rs 7,500 crore,” Ramesh Abhishek added.

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Former Infosys CEO V Balakrishnan had told the news agency earlier this year that regulations for startups need to be eased and they will flourish if the regulatory environment in the country becomes friendly and more clear. The startup community has been facing several challenges on regulatory and compliance front and has been waiting for the government to look into the issues faced, including angel tax issue. Several startups have been hit with tax notices for raising funding from family, friends, angel investors or angel networks not registered with the capital markets regulator.

Some of the other challenges faced by the startups include limited availability of domestic risk capital, obstacles of conventional bank finance.

The government had floated a Rs 10,000 crore funds of funds for startups (FFS) two years ago to meet the funding requirement of startups and made SIDBI as the operating agency for the FFS. According to the norms, the FFS contributes to the corpus of Sebi-registered AIFs, which in-turn have to invest at least twice the contribution under FFS in startups.

Recently, Commerce and Industry Suresh Prabhu has informed Rajya Sabha said in a parliamentary question that approximately Rs 602.6 crores have been disbursed from the FFS and 142 startups have been supported till June 30, 2018. On the other hand, the government had announced measures such as tax holiday and inspector raj-free regime, incentives and capital gains tax exemptions to startups under the ‘Startup India Action Plan’.

Meanwhile, the Securities and Exchange Board of India (SEBI) too recently proposed to ease its regulations for startups to go public, by providing relaxation in several requirements including those related to shareholding norms and investor categories.

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