7 Best Government Schemes for Startups in India

India offers several government schemes to support startups. The Startup India Initiative provides tax exemptions, intellectual property rebates, and self-certification for compliance, easing the startup process. The Startup India Seed Fund Scheme (SISFS) offers funding up to ₹50 lakh to help startups develop products, test ideas, and scale their businesses. The Credit Guarantee Scheme for Startups (CGSS) provides collateral-free loans with a 75% credit guarantee to reduce financial risks. Additionally, State-Specific Schemes like Startup Karnataka and T-Hub offer regional funding, incubation, and mentoring support. Entrepreneurs can apply for these schemes through the Startup India Portal or respective state portals.

India is home to over 80,000 startups and 100 unicorns valued at $300 billion, but many still face challenges such as securing funding, building infrastructure, and dealing with regulations. To help, the government launched the Startup India Initiative on January 16, 2016, led by Prime Minister Narendra Modi, to make it easier to start and grow businesses in India.

A big part of this program is the Startup India Seed Fund Scheme (SISFS), started in 2021, with a budget of ₹945 crore. This scheme gives startups financial help to test their ideas, create prototypes, and bring products to market. Startups can get up to ₹20 lakh to develop their ideas and up to ₹50 lakh to expand their operations.

By the end of 2023, the scheme had partnered with 217 incubators and provided ₹841.8 crore to support new businesses across the country. This is helping entrepreneurs turn their ideas into successful ventures. These initiatives have significantly contributed to nurturing early-stage startups in India, providing them with the necessary financial support to innovate and scale their operations.

1. Startup India Initiative

The Startup India Initiative, launched in 2016, is a flagship program of the Government of India designed to foster entrepreneurship and innovation. The initiative aims to reduce regulatory burdens, provide financial support, and create a nurturing environment for startups to flourish. By addressing common challenges like funding gaps, compliance challenges, and lack of mentorship, it serves as the foundation for building a robust startup ecosystem.

Benefits

• Tax Exemptions: Eligible startups enjoy a 100% tax rebate for three consecutive years within their first ten years of incorporation.
• Intellectual Property Support: Startups receive an 80% rebate on patent fees and expedited patent processing.
• Self-Certification: Startups can self-certify compliance with labor and environmental laws.
• Government Procurement: Startups can directly participate in government tenders without prior experience or turnover requirements.

Eligibility Criteria

• Must be incorporated as a Private Limited Company, Limited Liability Partnership (LLP), or a Partnership Firm.
• Annual turnover should not exceed ₹100 crores in any financial year since incorporation.
• Should work towards innovation, development, or improvement of products, processes, or services.
• The entity must not have been formed by splitting or reconstructing an existing business.

How to Apply

1. Register your startup at the official Startup India portal.
2. Fill out the form with company details, business objectives, and other required information.
3. Upload relevant documents such as your certificate of incorporation, director details, and a description of your innovative product or service.
4. Await recognition by the Department for Promotion of Industry and Internal Trade (DPIIT).

Business Plan or Obligations Required

• Innovative Business Model: Your business plan should highlight innovation in products, services, or processes. It must address a clear market gap or an unmet need.
• Scalability Potential: The plan should demonstrate potential for job creation and economic growth.
• Financial Plan: Detailed financial projections and funding requirements should be included.
• Obligations: Startups must comply with regulations related to financial audits, income tax filings, and labor laws.

2. Startup India Seed Fund Scheme (SISFS)

The Startup India Seed Fund Scheme (SISFS) was introduced in 2021 to provide early-stage startups with financial assistance for proof of concept, prototype development, product trials, and market entry. This scheme aims to mitigate early-stage funding challenges faced by entrepreneurs.

Benefits

• Up to ₹20 lakh for proof-of-concept development.
• Up to ₹50 lakh for product development, testing, and scaling operations.
• Funds provided as grants, debt instruments, or convertible securities.

Eligibility Criteria

• The startup must be recognized by DPIIT under Startup India.
• It must not have received more than ₹10 lakh in funding from any other source.
• Startups should be incorporated within the last two years.
• The business idea must address a market gap or social problem.

How to Apply

1. Visit the Startup India portal.
2. Apply under the SISFS section by submitting details about your startup and funding requirements.
3. Submit supporting documents like your business pitch deck, prototype details, and financial projections.
4. Approved startups will be connected with incubators for further funding and mentorship.

Business Plan or Obligations Required

• Detailed Prototype Plan: Startups must showcase a viable prototype or MVP (minimum viable product).
• Market Analysis: The plan should include a clear understanding of target customers and competitors.
• Scalability: Include milestones and strategies for scaling operations.
• Obligations: Use funds exclusively for activities outlined in the approved proposal.

3. Credit Guarantee Scheme for Startups (CGSS)

The Credit Guarantee Scheme for Startups provides collateral-free loans to startups through eligible financial institutions. This helps address the reluctance of banks to lend to startups due to perceived risks.

Benefits

• Collateral-free loans with credit guarantees covering up to 75% of the loan amount.
• Applicable for working capital needs or capital expenses.

Eligibility Criteria

• Must be a DPIIT-recognized startup.
• Loans are limited to startups that can demonstrate financial viability and repayment capacity.

How to Apply

1. Approach a participating bank or financial institution offering credit under the CGSS.
2. Submit a loan application along with supporting documents like audited financial statements, a business plan, and tax filings.
3. The financial institution evaluates the application and applies for a guarantee under CGSS.

Business Plan or Obligations Required

• Revenue Projections: Startups must submit clear financial forecasts showcasing their ability to generate revenue and repay the loan.
• Feasibility Study: Include a detailed market study to demonstrate the business potential.
• Obligations: Ensure timely repayment of the loan and compliance with reporting requirements.

4. Atal Innovation Mission (AIM)

The Atal Innovation Mission, launched by NITI Aayog, aims to promote a culture of innovation by supporting startups through incubation centers and innovation labs.

Benefits

• Grants for establishing Atal Incubation Centers (up to ₹10 crores).
• Access to mentors, investors, and networking opportunities.

Eligibility Criteria

• Startups working on innovative solutions in technology, healthcare, education, or other impactful sectors.
• Preference for startups collaborating with academic institutions or social enterprises.

How to Apply

1. Visit the AIM website.
2. Submit an application highlighting your innovation and its potential impact.
3. Selected startups will be connected with an Atal Incubation Center.

Business Plan or Obligations Required

• Innovation Focus: Emphasize a unique and impactful solution in the application.
• Societal Impact: Startups addressing major societal or environmental challenges are given preference.
• Obligations: Maintain transparency in fund utilization and progress reporting.

5.Pradhan Mantri Mudra Yojana (PMMY)

Introduced in 2015, PMMY focuses on providing microfinance to small businesses and entrepreneurs. It caters to the needs of non-corporate small enterprises that often struggle to secure loans through traditional banking channels.

Benefits:

• Loans up to ₹10 lakh under three categories: Shishu (up to ₹50,000), Kishor (₹50,000–₹5 lakh), and Tarun (₹5 lakh–₹10 lakh).
• Collateral-free loans with flexible repayment terms.

Eligibility Criteria:

• Non-corporate, non-farm small/micro enterprises.
• Proprietors, partnership firms, or individuals involved in manufacturing, trading, or services.

How to Apply:

• Approach banks, microfinance institutions (MFIs), or NBFCs offering Mudra loans.
• Submit a loan application form along with business-related documents.
• Discuss loan terms with the lending institution.

Requirements:

• A viable business plan detailing the use of funds and repayment schedule.
• Proof of identity, address, and business existence.

5. Stand-Up India Scheme

Launched in 2016, the Stand-Up India Scheme aims to promote inclusivity by supporting women and Scheduled Caste/Scheduled Tribe (SC/ST) entrepreneurs. The scheme provides financial assistance to set up greenfield enterprises in manufacturing, services, or trading sectors.

Benefits:

• Bank loans between ₹10 lakh and ₹1 crore for greenfield projects.
• Support for working capital and term loans.

Eligibility Criteria:

• Applicants must be SC/ST or women entrepreneurs aged 18 and above.
• The business must be a new greenfield project (not an expansion of an existing business).
• The entity must not have defaulted on loans with any financial institution.

How to Apply:

• Register on the Stand-Up India Portal.
• Approach a bank branch with your business plan.
• Fill out the loan application form and provide supporting documents.

Requirements:

• A detailed business plan explaining project viability and financial projections.
• No history of defaulting on loans.

6. Open Network for Digital Commerce (ONDC) – Build for Bharat Hackathon

Launched in December 2023, this initiative by ONDC focuses on fostering innovation in the e-commerce sector. It aims to bring inclusivity and technological advancements to underserved markets by encouraging startups, developers, and enterprises to build innovative solutions for small-scale businesses and consumers.

Benefits:

• Access to equity capital up to $250,000 for top-performing teams.
• $100,000 in Google Cloud credits to support infrastructure needs.
• Mentorship and networking opportunities with industry experts.
• Recognition and market access for innovative solutions.

Eligibility and Requirements:

• Open to startups, developers, academic institutions, and enterprises.
• Participants must propose solutions to improve buyer-side applications on ONDC.
• Solutions should focus on inclusivity, ease of use, and scalability for rural and urban India.

How to Apply:

• Visit the ONDC website to register for the hackathon.
• Submit a proposal detailing the problem your solution addresses, technical specifications, and expected outcomes.
• Shortlisted teams will be invited for a pitching round and further evaluations.

7. Space Startup Fund

Approved in October 2024, the ₹10 billion fund supports space startups to strengthen India’s position in the global space market. Managed by IN-SPACe (Indian National Space Promotion and Authorization Center), the initiative targets early-stage startups involved in satellite technology, space research, and launch vehicle development.

Benefits:

1. Financial support to scale up operations and develop space technologies.
2. Access to infrastructure, research facilities, and mentorship from ISRO and IN-SPACe.
3. Market access to international space contracts and collaborations.

Eligibility and Requirements:

1. Startups registered in India and recognized by DPIIT under the Startup India initiative.
2. Focused on space-related technology such as satellites, communication, or propulsion systems.
3. Must demonstrate a clear business plan, technological feasibility, and potential market impact.

How to Apply:

1. Register as a startup on the Startup India portal.
2. Submit your application to IN-SPACe via their official website, detailing your technology and funding requirements.
3. Await evaluation and approval from IN-SPACe’s funding committee.

State-Specific Startup India Schemes in India

Several Indian states have launched their own startup-specific policies and schemes under the broader framework of the Startup India Initiative to cater to regional needs and leverage local strengths. These state-specific programs aim to complement the national efforts by focusing on the unique requirements of entrepreneurs within their jurisdictions.

1. Karnataka – Startup Karnataka

• About: Karnataka’s policy promotes innovation in technology, biotechnology, and clean energy.

Benefits:

• • Seed funding up to ₹50 lakhs for early-stage startups.
  • Access to the state’s Startup Warehouse for affordable office spaces.
  • Incentives for startups led by women and rural entrepreneurs.

Focus Areas: IT, agriculture, aerospace, and biotechnology.

2. Maharashtra – Maharashtra State Innovation Society (MSInS)

• About: MSInS provides funding and mentorship to startups through grants and partnerships with incubators.

Benefits:

• • ₹10 lakhs in financial support for incubators and accelerators.
  • Assistance for startups working in social impact sectors like healthcare and education.

Focus Areas: Clean energy, fintech, and healthcare.

3. Telangana – T-Hub

• About: T-Hub is a state-supported innovation hub and incubator based in Hyderabad.

Benefits:

• • Access to mentorship, funding, and coworking spaces.
  • Partnerships with global tech giants for market access.

Focus Areas: IT, agritech, and life sciences.

4. Gujarat – Startup Gujarat

• About: Gujarat’s policy focuses on supporting entrepreneurs in the manufacturing and service sectors.

Benefits:

• • Financial assistance up to ₹30 lakhs for innovative projects.
  • Interest subsidies and VAT reimbursements for startups.

Focus Areas: Manufacturing, renewable energy, and robotics.

5. Kerala – Kerala Startup Mission (KSUM)

• About: Kerala’s startup ecosystem emphasizes social innovation and sustainable technologies.

Benefits:

• • Early-stage funding of up to ₹10 lakhs.
  • Subsidized coworking spaces and access to a global startup ecosystem.

Focus Areas: Tourism, healthcare, and education.

6. Andhra Pradesh – Innovation and Startup Policy

• About: This policy encourages entrepreneurs in the IT and electronics sectors.

Benefits:

• • Grant-in-aid up to ₹1 crore for startups.
  • Incentives for startups working on social and rural innovation.

Focus Areas: IT, electronics, and renewable energy.

Success Stories of Startups Benefiting from Government Schemes

These success stories illustrate how government schemes, when effectively utilized, can bridge critical gaps in funding, infrastructure, and mentorship, enabling startups to turn innovative ideas into impactful ventures

1. Zoho Corporation – Leveraging Startup India Initiative

Scheme Utilized: Startup India Initiative

Story: Zoho Corporation, an Indian SaaS giant, utilized benefits under the Startup India Initiative to streamline regulatory compliance and access tax exemptions. These advantages allowed the company to focus on R&D, leading to the development of globally recognized software products like Zoho CRM. Today, Zoho is valued at over $5 billion and stands as an example of how government-backed programs can help startups scale to international success.

Impact: Reinforced R&D capabilities, enabling global competitiveness.

Source: Startup India Portal

2. Skyroot Aerospace – Supported by IN-SPACe

Scheme Utilized: Space Startup Fund by IN-SPACe

Story: Hyderabad-based Skyroot Aerospace, India’s first private company to develop and launch a rocket, benefited from mentorship, funding, and infrastructure provided by the Space Startup Fund. The scheme enabled Skyroot to create its Vikram-S rocket, which was successfully launched in 2022, showcasing India’s potential in the global space industry.

Impact: Helped Skyroot achieve technical milestones and boost private space exploration in India.

Source: IN-SPACe

3. Gramophone – Empowered by Stand-Up India

Scheme Utilized: Stand-Up India Scheme

Story: Gramophone, a Madhya Pradesh-based agritech startup, secured funding under the Stand-Up India Scheme. The scheme’s financial support enabled Gramophone to provide farmers with crop advisory services, high-quality seeds, and fertilizers through their app, improving agricultural efficiency and profitability.

Impact: Helped digitize farming operations for over 1 million farmers in India.

Source: Stand-Up India Portal

4. Ather Energy – Beneficiary of the PLI Scheme

Scheme Utilized: Production Linked Incentive (PLI) Scheme

Story: Ather Energy, a Bangalore-based electric vehicle (EV) manufacturer, received support under the PLI Scheme to scale up its EV production. The incentives allowed Ather to expand its manufacturing units and launch innovative products like the Ather 450X, strengthening India’s EV market.

Impact: Accelerated EV adoption and reduced production costs for sustainable mobility solutions.

Source: PLI Scheme Details

Critique and Future Outlook

While these success stories highlight the transformative impact of government initiatives, they also underline the need to address gaps in accessibility, implementation, and inclusivity to ensure that every entrepreneur can benefit from these programs.

Critique of Existing Schemes

While government schemes have undoubtedly fostered innovation and entrepreneurship, several challenges remain that hinder their full potential:

1. Awareness and Accessibility:
   • Many startups, especially in Tier 2 and Tier 3 cities, remain unaware of these schemes or how to access them.
   • Language barriers and lack of targeted outreach campaigns often leave rural and smaller urban entrepreneurs out of the loop.
2. Implementation Delays:
   • Delays in fund disbursement, particularly in schemes like the Startup India Seed Fund Scheme, have been reported.
   • Bureaucratic hurdles in accessing loans or incentives under programs like Stand-Up India discourage potential applicants.
3. Eligibility Constraints:
   • Stringent eligibility criteria, such as the requirement for DPIIT recognition, exclude many startups that may still need funding and support.
   • Overemphasis on tech-driven startups often sidelines traditional or social enterprises.
4. Limited Sectoral Focus:
   • Many schemes focus on IT, e-commerce, and space sectors, leaving gaps in support for areas like agriculture, healthcare, and green technology, which also hold immense potential for innovation.
5. Fragmentation of Schemes:
   • Entrepreneurs often find it challenging to navigate the plethora of overlapping schemes. A centralized mechanism for information and application would reduce confusion.

Future Outlook

As India aspires to become a global leader in innovation and entrepreneurship, enhancing the effectiveness and inclusivity of government schemes will be crucial to ensuring startups across all regions and sectors can thrive

1. Increasing Awareness:
   • Conduct targeted outreach campaigns, especially in regional languages, to educate entrepreneurs across all regions about available schemes.
   • Establish partnerships with local bodies, incubators, and educational institutions to disseminate information effectively.
2. Simplifying Processes:
   • Streamline application and approval processes to reduce bureaucratic delays.
   • Introduce a single-window system for startups to apply for multiple schemes and track their progress.
3. Broadening Eligibility:
   • Loosen some eligibility requirements, especially for small and medium enterprises that may not qualify for DPIIT recognition.
   • Expand the scope to include more non-tech startups and social enterprises.
4. Sectoral Diversity:
   • Launch specialized schemes for underserved sectors such as clean energy, rural innovation, healthcare, and agritech.
   • Provide dedicated funding pools for startups addressing critical societal challenges.
5. Encouraging Public-Private Collaboration:
   • Involve private players in mentorship, funding, and market access through public-private partnerships.
   • Create innovation clusters with shared resources for startups to foster collaboration and reduce costs.
6. Faster Funding Mechanisms:
   • Set clear timelines for fund disbursement under schemes like SISFS to ensure startups can access capital when they need it most.
   • Provide bridge funding options to startups awaiting larger grants or loans.
7. Monitoring and Feedback Mechanism:
   • Establish real-time monitoring systems to assess the impact of schemes and address startup grievances.
   • Gather regular feedback from startups to identify and address pain points in accessing support.

Conclusion

India’s startup ecosystem has witnessed a remarkable transformation, supported by both national and state-level initiatives. From funding and mentorship to infrastructure and market access, schemes like Startup India, Stand-Up India, and state-specific programs such as Startup TN are fostering an environment where entrepreneurs can thrive. However, challenges like awareness gaps and bureaucratic delays still need to be addressed to ensure these programs reach their full potential. By building a more inclusive and streamlined framework, India can solidify its position as a global innovation hub, empowering startups to drive economic growth and social impact.

Collaborating with Startup TN provides a unique opportunity for Vakilsearch to position itself as a trusted partner for entrepreneurs navigating the complexities of starting and scaling a business. With its expertise in legal, tax, and compliance services, Vakilsearch can:

1. Simplify Startup Processes: Offer tailored legal and compliance solutions to startups registered under Startup TN, including incorporation, trademark registration, and GST filings.
2. Boost Awareness: Conduct joint workshops and webinars to educate entrepreneurs on government schemes and their legal requirements.
3. Enhance Accessibility: Partner with Startup TN’s incubators and hubs to provide on-ground support and one-on-one consultation for budding entrepreneurs.
4. Facilitate Scheme Utilization: Help startups meet eligibility criteria for schemes like seed funding, tax exemptions, and interest subsidies.

This partnership can strengthen Startup TN’s mission of fostering innovation while enhancing Vakilsearch’s presence as a go-to platform for startups in Tamil Nadu and beyond. Together, this collaboration can drive a new wave of entrepreneurship, setting an example for public-private synergy in India’s startup ecosystem.

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FAQs: Government Schemes for Startups in India