How Ministry of MSMEs help entrepreneurs and start-ups in India?

When the Union Budget 2016-17 was announced, Finance Minister Arun Jaitley started his speech with references to start-ups and MSMEs. The budget laid out a series of policy initiatives and schemes that aimed at easing the hurdles that start-ups and entrepreneurs are facing and ensuring MSMEs in the country get a boost.

When Prime Minister Narendra Modi launched the Start-up India Action Plan, he had mentioned that the government wants to play a supporting role and that of an enabler. The budget aims to provide some very important steps around the ease of doing business, taxation, and access to capital for MSMEs and skilling.MSMEs

 

The Ministry of MSMEs aims to help entrepreneurs, new businesses online and start-ups by launching the following schemes/programs:

  • No tax on income from start-ups: The first step of the Start-up India Action plan would be to boost economic growth and employment. For this, a 100% deduction of profits for 3 out of 5 years for start-ups during April, 2016 to March 2019, with certain riders will be available. Similarly, to promote innovation, a special patent regime with a 10% rate of tax on income from worldwide exploitation of patents developed and registered in India was proposed.
  • Capital gains and ARCs: The Long Term Capital Gains Tax has been a huge bone of contention for the Start-up community. To get the benefits of the scheme, the government has now reduced the holding period from three years to two years.
  • 1 day incorporation: This is another provision of the start-up action plan. The provision will be made to enable registration of a company in one day. 1 day incorporation via a mobile application would be possible. This would be a big boost for aspiring entrepreneurs. As of now, it takes anywhere between 15 and 30 days for a company to get incorporated. It would also be interesting would be to see if all steps ranging from Digital Signatures, Director Identification Numbers (DINs), Name approvals and Certificates of Incorporation can be done in 1 day.
  • Skilling India: The National Skill Development Mission has created an elaborate skilling ecosystem and imparted training to 76 lakh youth. The Pradan Mantri Kaushal Vikas Yojna has decided to set up 1500 multi skill training institute across the country.
  • MUDRA Scheme: The Pradhan Mantri Mudra Yojna was launched for the benefit of the bottom of the pyramid entrepreneurs. Banks and NBFCs have reported an amount of 1 lakh crore covering 2.5 crore borrowers.
  • Corporate tax for small companies: The corporate income tax rate for the next financial year of relatively small enterprises that is companies with turnover not exceeding Rs. 5 crore is proposed to be lowered to 29 % plus surcharge and cess.
  • Rs 500 crore to support SC/ST, women entrepreneurs: To set up entrepreneurial hubs for entrepreneurs from the backward classes by allocating Rs. 500 crore for its Stand-Up India scheme. This will benefit 2.5 lakh entrepreneurs.

Apart from the above programs and schemes, two funds are also launched by Small Industries Development Bank of India (SIDBI), one for funding start-ups in India and another to aid small enterprises.

The Indian Aspiration Fund aims at catalysing tens of thousands of crores of equity investment into start-ups and MSMEs thus creating employment for lakhs of persons mostly educated youth.

The second fund is a debt fund called SIDBI Make in India Loan for Enterprises (SMILE). The fund will provide soft term loans and loans in the nature of quasi-equity to MSMEs to meet debt-to-equity norms and pursue growth opportunities in existing MSMEs.

The Ministry also aims to move people from overstaffed agriculture sector to areas such as services and manufacturing through MSMEs and start-ups which fund their own business and creates employment.

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