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Top Government Schemes for Startups and MSMEs in India

Created on 07 May 2022

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Updated on 25 Aug 2022

Startup India, Standup India! No no this is not just a slogan, these are actual government schemes in which the government is providing a lot of benefits to startups and MSMEs registered in India.

We all know that demonetization and Covid-19 impacted India’s economy heavily so the best way to boost the economy is to provide support to Indian startups and MSMEs.

As of March 2022, just unicorn startups are valued at more than 319 billion dollars and there are more than 60,000 startups registered in India.

MSMEs in India alone contribute close to around 30% of the nation’s GDP(Gross Domestic Product) and around 50% of the total exports in India.

With these huge number of contribution to India’s GDP, it is very crucial to support them. So government always finds ways to support startups and MSMEs in India via central government schemes for startups and MSMEs.

So we will be knowing the top government schemes for startups and MSMEs provided by the central government.

Top government schemes for startups in India

1. Startup India Initiative

By far Startup India initiative is one of the largest government schemes specially focused on supporting startups in India. It was started by Prime Minister Narendra Modi in the year 2016 on 16th January.

More than 50,000 startups have been registered in this scheme. There are plenty of benefits a startup can get from the startup India scheme.

Some major benefits of the Startup India scheme:

  • Access to Funds:

The central government has allocated a massive 10,000 crore rupees budget for startups. Also, the government has informed banks to help startups get access to capital.

  • Tax exemption:

The government also provides 3 years tax holiday to startups. An interesting point to note in this scheme is that a startup can get 3 years of income tax exemption in any 3 years in a given timeframe of 10 years of startup incorporation.

To get tax exemption startups need to avail certification from the Inter-Ministerial Board (IMB) and which is set up and managed by the Department of Industrial Policy and Promotion This can help startups reinvest the money saved by taxes back towards the growth of the company.

  • Cost reduction:

Startups will be eligible to get patents and trademarks and other important compliance documents in an easy and fast trackway. They will also get upto 80% lower price in the cost of filing patents.

  • Apply for tenders:

As India is a developing country so there are a lot of opportunities for companies to participate in government tenders as the government has informed us they will be spending 1.4 trillion dollars on infrastructure in the next five years.

Even startups who have no prior experience or any turnover can apply for government tenders.

  • Tax benefits for investors:

Investors who are investing in startups are eligible for capital gains tax. It will help startups get more investments as investors can save a massive amount of their money via tax exemption.

  • Simplifying exits:

As if a startup wants to close its business then it can do it within 90 days as per the insolvency and bankruptcy code of 2016.

Eligibility for criteria for registering under the Startup India initiative:

a. Startup that should be incorporated in India upto 10 years ago is eligible.

b. The startup should have a high potential for achieving growth and wealth creation. It should be a scalable business model which is innovative or working towards the improvement of products and services.

c. The startup should be registered as a Partnership firm, Private limited company, or Limited liability partnership (LLP) in India.

d. From the time of incorporation of the company shall not have exceeded the turnover of 100 crore rupees in any financial year.

2. Startup India Seed Fund Scheme

Startup India Seed Fund Scheme is started by the government of India for very early-stage startups. It has been allocated a total budget of 945 crore rupees by the government of India. It has been expected to provide funds to 300 incubators and around 3600 startups.

Grants of upto 5 crore rupees will be provided to the selected incubators. Grants of upto 20 lakh rupees will be provided to startups for the development of prototypes or trials and upto 50 lakh rupees to a startup for scaling their products or services.

Eligibility for criteria for registering under Startup India Seed Fund Scheme

1. Startup will only be eligible for this scheme if it is incorporated in India within 2 years.

2. Startup should not have received monetary grants of upto 10 lakh rupees from the central or state government.

3. Support for International Patent Protection in Electronics & Information Technology  scheme (SIP-EIT)

SIP-EIT is a scheme that aims to support startups to increase international patent filing by Indians. It will foster our nation to improve the culture of innovation and Research and Development.

The major benefit of this scheme is that it provides reimbursement of all expenses of international patent filing, attorney fees, processing fees, cost of translation, etc. The total amount of reimbursement will be upto 15 lakhs or 50% of the total cost whichever is less.

Eligibility criteria for SIP-EIT:

1. It must be an MSME registered unit.

2. It can be a Software Technology Park(STP) unit.

3. Startup registered as a company.

Top government schemes for MSMEs in India

MSMEs(Micro, Small, and Medium Enterprises) are categorized into these categories:

MSMEs categorisation

Micro-Enterprise

Small Enterprise

Medium Enterprise

Manufacturing Sector 

Investment less than Rs 1 crore

Investments less than Rs 10 crore

Investments less than Rs 50 crore

 

Service Sector

Total revenue less than Rs 5 crore

Total revenue up to Rs 50 crore

Total revenue up to Rs 250 crore

1. Pradhan Mantri Mudra Yojana (PMMY)

Pradhan Mantri Mudra Yojana is a scheme for MSMEs and startups(non-farming and non-corporate sectors) that aims to provide loans and access to capital that can help them sustain and grow their business.

There are 3 categories under which loan is provided:

a. Shishu category – Companies are eligible to get a loan of up to 50,000 rupees for small businesses and startups which are in their early stages.

b. Kishor category – Mid-aged businesses who want to expand their operations can get up to 5,00,000 rupees of loan.

c. Tarun category – Experienced businesses who are into the business from many years can get loans of up to 10,00,000 rupees.

2. Credit Guarantee Trust Fund for Micro & Small Enterprises scheme(CGTSME)

CGTSME is a scheme that provides collateral-free loans to selected startups and MSMEs in India of upto 1 crore rupees. It was launched by the ministry of MSMEs and by far it is one of the largest schemes for MSMEs in India.

3. Standup India scheme

Standup India scheme is an initiative that aims to provide loans ranging from Rs 10 lakh to 1 crore to at least one woman entrepreneur or at least one SC/ST community entrepreneur who should have at least 51% stake in his/her business.

Around 21% of Indian startups and MSMEs benefited from central government schemes in 2020: Survey.

Conclusion

There are a lot more schemes that are provided and supported by state governments as well. Every state has different kinds of support and schemes they provide.

The central government scheme provides most of the schemes included here. Even we can see in today’s time even the private sector companies are helping startups and businesses by giving capital, technology, collaborating with them, etc.

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Harsh Hingu

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