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Department for Promotion of Industry and Internal Trade (DPIIT) Secretary, Ministry of Commerce and Industry, Guruprasad Mohapatra on Friday said that the measures envisaged in the Budget for 2021-22 will further boost the Start-ups in the country.
In a press briefing held here, Dr. Mahapatra said that measures such as Incentivizing incorporation of One Person Companies (OPCs) directly benefits Startups and Innovators in the country, according to an official release.
The budget incentivizes the incorporation of One Person Companies (OPCs) by amending the Companies (Incorporation) Rules to allow OPCs to grow without any restrictions on paid-up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non-Resident Indians (NRIs) to incorporate OPCs in India.
He said that these amendments will be effective from 01 April 2021. Previously NRIs were not allowed to incorporate OPCs. Now any natural person, who is an Indian citizen, whether resident in India or otherwise, would be allowed to form an OPC. The amendments also reduce the residency period to 120 days from 182 days for NRIs, for being considered as a resident in India. This would help a number of overseas Indians establish businesses in India.
DPIIT Secretary said that the provisions permit conversion of One Person Company into a Public Company or a Private company anytime, removing the compulsory wait period of two years. It will substantially help startups to grow and enhance their ease of doing business. Similarly, the limitation of Paid-up capital and turnover presently applicable for OPCs (paid-up share capital of fifty lakhs rupees and an average annual turnover of two crore rupees) has been done away with so that there are no restrictions on the growth of OPCs.
He reiterated that these provisions will help India’s startups and support the growth of startups in the country.
A credit guarantee fund for start-ups is to be established with a corpus of Rs 2000 crore. The scheme will provide a guarantee to banks, FIs, NBFCs, and AIFs for collateral free loans to DPIIT recognized Startups up to Rs. 10 crores. The National Credit Guarantee Trustee Company Ltd. (NCGTC) shall manage the day to day operations of the CGSS as the Trustee. It would target coverage of guarantees for approximately Rs. 15,000 crores with 3,000 units with an average loan size of Rs.5 crores to the eligible borrower, he added.
The secretary said that the establishment of the Credit Guarantee Fund for providing portfolio guarantees under CGSS is expected to provide an incentive to financial intermediaries to lend to Startups, thus resulting in increased availability of funding for Startups. This would go a long way in encouraging innovation and entrepreneurship, apart from fulfilling the country’s agenda for development and inclusive goals in the long run.
The Seed Fund to an eligible startup by the incubator shall be disbursed as follows–Up to Rs. 20 Lakhs as a grant for validation of Proof of Concept, or prototype development, or product trials. The grant shall be disbursed in milestone-based installments. These milestones can be related to the development of a prototype, product testing, building a product ready for market launch, etc.
Up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments