Government Schemes for Startups in India – A Complete Guide

Introduction to Government Schemes for Startups

This decade is going to be known as India’s entrepreneurial era, with a booming startup atmosphere and favourable conditions for entrepreneurs. India witnessed several startups, making it one of the world’s fastest-growing startup hubs. The government’s continuous support, including numerous schemes for startups in India, has played a key role in this growth. Let us learn more about government schemes, policies and support for starting startups in India as we discuss the top schemes for startups and their benefits.

Pradhan Mantri Mudhra Yojna (MUDRA Loan)

PMMY is a government scheme for startups and small businesses, offering loans to help them grow. Launched in 2015, eligible startup applicants can get loans up to 10 lakhs for their working capital needs. The interest rates for Mudra loans can change every quarter based on RBI policies. Generally, they fall between 8.40% and 12.45% for loan durations of 1 to 5 years.

There are three loan categories:

• Shishu – Up to 50,000
• Kishor – Up to 5 Lakhs
• Tarun – Between 5-10 Lakhs

These loan categories symbolize the growth stage, funding requirements, and serve as reference points for the micro unit or entrepreneur, indicating the next phase of progression or expansion for startups.

Benefits of the Scheme for Startups

• Loans for vendors, traders, shopkeepers, and service sectors.
• Get working capital through MUDRA Cards.
• Equipment finance for micro units.
• Commercial use vehicle loans.
• Funding for agri-allied activities like pisciculture, beekeeping, poultry farming, etc.
• Loans for commercial tractors, tillers, and two-wheelers.

Eligibility Criteria for Startups Applying to this Scheme

The scheme is open to the following individuals and entities:

• Within the age group of 18 to 65 years.
• Mudra loans for non-farm income-generating businesses in trading, services, and manufacturing.
• Credit requirement should not exceed ₹10 lakh.

Application Process

To apply for Mudra loans online:

• Download the application form from the bank’s website.
• Fill it out, attach necessary documents.
• Submit online for a reference ID.
• Bank representative will contact you using the ID for further formalities.
• After processing, the approved loan amount is disbursed to your bank account.

For offline Mudra loan application:

• Visit an eligible bank branch directed by the RBI.
• Fill and submit the form with documents.
• Complete subsequent formalities.
• Upon approval, funds are disbursed to the specified bank account.

Online applications can be filed on the Udyami Mitra portal.

Success Story of PMMY Scheme

Mr. Sijesh P. from Kannur, Kerala, worked abroad for 8 years. When he returned to India, he became a sales manager in a medical unit. Excitedly, he told the Prime Minister how he used a Mudra Loan of Rs. 8.55 lakh to start making herbal tooth powder. He even gave the Prime Minister some samples.

A Scheme for the Promotion of Innovation, Rural Industries & Entrepreneurship (ASPIRE)

ASPIRE, the Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship, is a government scheme for startups and entrepreneurs in the agro-industry, offering them support such as incubation spaces, funds, and a tech network. ASPIRE includes Livelihood Business Incubators, Technology Business Incubators, and a fund managed by the Small Industries Development Bank of India (SIDBI).

ASPIRE provides financial support of up to INR 100 lakh or 100% of the Plant and Machinery cost for setting up livelihood business incubators and/or technology business incubators, funded by the Government. Funds from organizations like SIDBI, Coir, and Khadi industries are crucial for ASPIRE projects, benefiting many startups and people in the country.

Benefits of the Scheme for Startups

• It enhances agriculture through innovative business models in rural areas.
• It empowers entrepreneurs, particularly in rural regions.
• The scheme supports the adoption of technology for increased productivity in rural and agro-based industries.
• It helps in creating job opportunities contributing to income generation and reducing unemployment.

Eligibility Criteria for Startups Applying to this Scheme

The ASPIRE scheme is open to the following individuals and entities:

• Entrepreneurs seeking funding or development support for their startup.
• Research, technical, or educational institutions with a focus on rural and agro industries.

Application Process

Submit ASPIRE applications to the ASPIRE Scheme Steering Committee at the Ministry of Micro, Small, and Medium Enterprises (MSME). The committee, chaired by the Secretary of the Ministry of MSME, oversees coordination, overall policy, and management support.

Success Story of ASPIRE Scheme

There is a rural entrepreneur who got help from the ASPIRE Scheme. With the new skills, she improved her products and found new customers, making her business grow a lot. Now, she is a role model for others in her village who want to be entrepreneurs.

Multiplier Grants Scheme

The Multiplier Grants Scheme, run by the Department of Electronics and Information Technology, supports research and development (R&D) collaboration between industries and academic institutions in India. It aims to bridge the gap between R&D and turning ideas into products. If an industry’s startups support R&D for a product, the government chips in financial assistance, doubling the industry’s contribution.

The scheme has a budget of Rs. 36 Crores, with Rs. 24 Crore from the Department of Electronics and Information Technology and operates under the Technology Development Council budget head.

Benefits of the Scheme for Startups

• Encourages market-oriented R&D in academic and government labs.
• Mobilizes technical knowledge among industry workers.
• Promotes cost-effective, innovative product development.
• Encourages royalty sharing and incentivizes human resources in academia and government R&D labs.
• Fosters interactions between academia/R&D labs and industries, boosting entrepreneurship and business knowledge.

Eligibility Criteria for Startups Applying to this Scheme

• Open to entrepreneurs and startups, as well as various business industries.
• Broad criteria for project proposals, emphasizing collaboration between academic institutions/R&D bodies and industry/consortiums in E&IT areas.

Application Process

• Visit the Ministry of Electronics and Information Technology’s (MeitY) official website.
• Select Multiplier Grants Scheme.
• Download the application form.
• Fill in details and submit the application, following ongoing project invitations.
• The Multiplier Grants Scheme provides valuable financial assistance, particularly for entrepreneurs with innovative ideas, contributing to indigenous business growth and fostering research labs and entrepreneurial start-ups.

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

SIP-EIT helps small businesses and tech startups in India with money to file patents internationally. It supports MSMEs in the global patent filing process to encourage innovation and recognize the value of patents worldwide. This initiative, led by the Department of Electronics & Information Technology, MeitY, Government of India, financially assists MSMEs and Tech Startups in protecting their innovative works globally, opening growth opportunities in the Information Communication Technology & Electronics (ICTE) sector.

Benefits of the Scheme for Startups

• Financial support for international patent filing in the ICTE sector is available to eligible entities.
• Reimbursement is limited to the lesser of Rs. 15 lakhs per invention or 50% of total expenditures.
• Eligible expenses include official fees, examination and processing fees, search expenses, attorney charges, and translation costs.
• Reimbursement is applicable for expenses incurred from the date of application acceptance until the patent is granted.

Eligibility Criteria for Startups Applying to this Scheme

The applicant must be:

• Registered under the MSME Development Act, 2006, with proof.
• A company under the Companies Act, 2013, meeting MSME Act investment criteria.
• A Software Technology Park unit, meeting MSME Act investment criteria.
• A tech incubation enterprise/startup in an incubation center, registered as a company, meeting MSME Act investment criteria.

Application Process

The online application process for the scheme involves the following steps:

• Carefully review the brochure to ensure that you meet the eligibility criteria.
• To apply, create a Login ID, which will be used for further communications.
• Once your user account is created, log in and complete the online application for the scheme. Before proceeding, make sure to thoroughly read the guidelines and check the list of documents to be uploaded during the online application form filling.

Credit Guarantee Scheme for Startups (CGSS)

The Credit Guarantee Scheme for Startups is run by the National Credit Guarantee Trustee Company, was introduced by the Government of India to help startups. Starting a business is tough for entrepreneurs due to a lack of funds and banks considering them risky. To make it easier, the government launched this scheme.

With Rs. 2000 crore, the scheme offers startups collateral-free loans. It provides a guarantee for an agreed time on the credit, giving eligible startups up to Rs. 5 crores in credit guarantee. This covers different types of assistance like working capital, debentures, term loans, venture capital, and more.

Benefits of the Scheme for Startups

• Eligible institutions can register under the scheme by submitting a signed undertaking and Board Resolution, with the format available on the website.
• Once the Member Institution (MI) is successfully registered, login credentials will be created for the MI on NCGTC’s
• The MI can then apply for guarantee cover through the portal.

Eligibility Criteria for Startups Applying to this Scheme

To qualify for the Credit Guarantee Scheme for Startups, the entity must meet the following criteria:

• Recognized as a startup by Department for Promotion of Industry and Internal Trade (DPIIT) according to Gazette Notifications.
• Have a stable revenue stream, evaluated through audited monthly statements spanning 12 months, suitable for debt financing.
• Not in default with any lending/investing institution and not classified as a Non-Performing Asset per RBI guidelines.
• Certification of eligibility by the member institution for the guaranteed cover.

Application Process

• Eligible institutions can register under the scheme.
• Submit a signed undertaking and Board Resolution using the provided format on the website.
• Upon successful registration as a Member Institution (MI), login credentials will be generated.
• MI can then apply for guarantee cover on the NCGTC’s portal.
• To learn more and register as an MI, visit the NCGTC’s portal.

Startup India Initiative

Launched in 2016 by Prime Minister Narendra Modi, the Startup India Initiative is the biggest government scheme for startups in India, encompassing over 50,000 businesses. This scheme has implemented key measures to support and boost startups, creating a favourable environment for entrepreneurs to flourish. The DPIIT plays a pivotal role in overseeing the programs and initiatives of the Startup India Scheme. It provides a wide array of eBooks, courses, and mentorship programs to nurture leadership and skills.

Benefits of the Scheme for Startups

Critical benefits of this scheme for entrepreneurs include:

• Exemption from taxes
• Reduction in costs
• Simplified business wind-up process within 90 days
• Access to funds
• Self-certification for labour and environmental laws
• Expedited patent registration with an 80% fee rebate.

Eligibility Criteria for Startups Applying to this Scheme

Here is the eligibility for this government funding for startups:

• The startup should be a registered partnership firm, private limited company, or LLP.
• Turnover should not exceed 100 crores in any of the previous financial years.
• The startup must apply within ten years from the date of formation.

Application Process

• Incorporate: The startup should be registered as private limited, Partnership, or LLP.
• Startup India Registration: Visit website and complete the registration.
• DPIIT Recognition: Apply on Startup India and choose the entity type.
• Document Submission: Provide incorporation, funding, PAN of the Startup.
• Self-Certification: Confirm eligibility (5 years, turnover < Rs. 100 Cr).
• Recognition Number: Instant on application. Certificate after review.

Success Story of Startup India Initiative Scheme

Bhavish Aggarwal and Ankit Bhati started Ola and revolutionized the traditional taxi industry, evolving into a multi-billion-dollar enterprise, symbolizing the potential of Indian entrepreneurs.

Startup India Seed Fund Scheme

The Startup India Seed Fund Scheme (SISFS) provides financial help to early-stage startups in India for various needs like market entry, trials, and prototype development. It is a top government funding scheme with a budget of 945 crores, intending to support 3600 startups. Grants up to 20 lakh rupees are available for trials or prototypes, promoting innovation culture and development in the country.

Benefits of the Scheme for Startups

• Support for 3,600 entrepreneurs through 300 incubators in the next 4 years.
• Eligible incubators get grants up to Rs. 5 crores.
• Startups receive up to Rs. 20 lakhs for proof of concept, prototype, or trials.
• Investments up to Rs. 50 lakhs for startups in market entry, commercialization, or scaling up through debentures or debt-linked instruments.

Eligibility Criteria for Startups Applying to this Scheme

Here is the eligibility criterion for the scheme:

• You need to provide DPIIT recognition for the startup.
• Have a scalable, innovative, and feasible tech-based idea.
• Indian promoters should hold at least 51% of shares.
• It should be applied within two years of startup incorporation.
• The unique aspect of this government scheme is that it is open to any industry and does not require physical incubation.

Application Process

• Register on Startup India Portal.
• Obtain DPIIT Recognition Certificate within 2 years of incorporation.
• Apply for Startup India Seed Fund after DPIIT Recognition.
• Incubators evaluate and shortlist applications.
• Incubator Seed Management Committee (ISMC) makes final selections.
• Successful startups receive seed funds in instalments based on progress reports.

Atal Innovation Mission (AIM)

In 2016, the government launched a scheme known as Atal Innovation Mission. It aligns innovation policies and promotes ecosystems at various levels, from schools to industries. AIM also intends to establish Small Business Innovation Research and Development nationally, supporting SME/MSME/Start-ups and enhancing innovation in major research institutions like CSIR (Council of Scientific Industrial Research), Agri Research (ICAR) and Medical Research (ICMR). AIM is engaged in five key activities: Atal Tinkering Labs (ATL), Atal Incubation Centers (AIC), Atal New India Challenges (ANIC), Mentor India Campaign and Atal Community Innovation Centers (ACIC).

Benefits of the Scheme for Startups

• AICs for startups, fostering stability and scalability. Grants up to ₹10 crores to successful applicants establishing new or scaling up existing greenfield incubators.
• Under ANIC, successful applicants receive grants up to ₹1 crore, while Atal Grand Challenges offer substantial grants of up to ₹30 crore.
• ACIC aims to boost development by encouraging innovation in the most neglected areas of the country, aiming to create jobs in these regions.

Eligibility Criteria for Startups Applying to this Scheme

Here is the eligibility criterion for the scheme:

• Any Indian company incorporated under the Companies Act 1956/2013, primarily categorized as MSMEs according to the MSMED Act, 2006.
• Start-ups, officially recognized by the DPIIT.
• The applicant entity should hold a majority stake of more than 51% in India.
• To participate, applicants must have developed a functional prototype relevant to the challenge area under ANIC.

Application Process

      AIC

• Download the Atal Incubation Centres Guidelines from https://aim.gov.in/aic.php and review them carefully.
• Sign up with your email and institution name (if applicable).
• Check your email for the password and log in.
• Once logged in, select the Atal Incubation Centre tab on the home page.
• Fill in mandatory details, specifying AIC or EIC.
• Submit your application; no changes can be made post-submission.
• To view or print your application, log in using your email and password. Use the unique id code for future correspondence.

     ANIC

• Applicants must include the following information in their application:

1. Description of the proposed product with the patent number or reference to a peer-reviewed paper.
2. Market size for the proposed product, including details on assumptions made to assess it.
3. Demonstration of the product’s ability to meet market needs (product-market fit).
4. Details of proposed partnerships for designing, testing, piloting, and deploying the product.

• Submit applications online using the provided link – https://apply.aim-challenges.in/public/application/inc/63217c613009691476cda4ea

Success Story of Atal Innovation Mission

AIC-Pinnacle Entrepreneurship Forum, supported by AIM, Niti Aayog, Government of India, celebrates its incubated startups reaching a total valuation of over INR 300 crores. These startups secured about Rs. 30 crores in funding, with 30 companies collectively valued at over Rs. 300 crores. Established in 2018, AIC Pinnacle supports 60+ startups in areas like Electric Vehicles and Agri-tech. Beyond offering Rs. 5.41 crores in seed fund support, AIC Pinnacle contributes to 35+ Intellectual Property Rights, 250+ jobs, and a vibrant community of 15,000 within the entrepreneurial ecosystem.

Dairy Processing and Infrastructure Development Fund (DIDF)

Dairy Processing and Infrastructure Development Fund helps dairy cooperatives stay competitive for the benefit of farmers. The financial plan includes Rs. 1167 crore for interest, Rs. 8004 crores from National Bank for Agriculture and Rural Development (NABARD), and Rs. 2001 crore for eligible borrowers. National Dairy Development Board (NDDB) and National Cooperative Development Corporation (NCDC) contribute Rs. 12 crores. The funding split is 80% loan and 20% borrower’s share, with a 10-year repayment period and a fixed 6.5% interest rate.

It provides Startups in the dairy sector with the necessary financial support, infrastructure, technology, and market access to accelerate their growth and competitiveness in the industry. It supports upgrading milk processing, value-added products, electronic testing, project management, and other goals. Milk-producing businesses, multi-state milk cooperatives, state dairy federations, and NDDB subsidiaries are eligible for this support.

Benefits of the Scheme for Startups

• DIDF offers financial aid to dairy cooperatives and private processors for upgrading facilities, enhancing the Indian dairy industry’s modernization and product quality.
• The scheme boosts the country’s milk processing capacity, resulting in increased production, additional income for farmers, and a positive impact on the rural economy.
• DIDF contributes to employment creation by supporting the development of new processing facilities in the dairy sector.

Eligibility Criteria for Startups Applying to this Scheme

Criteria for Availing Dairy Processing and Infrastructure Development Fund (DIDF):

Financial Criteria:

• Up-to-date audit accounts without adverse opinions or disclaimers.
• No defaults with banks or financial institutions during the loan application.
• Outstanding dues to producer members within 4 payment periods.
• Positive net worth of the borrower.
• Consent for assignment of NBBD’s loan-securing steps.
• Regular financial returns meeting NBBD requirements.
• No receivables from the State Government for over a year.

Technical Criteria:

• Obtain Environmental or Statutory Clearances for dairy plants/producers.
• Own or long-term leased land without encumbrances for new or expanded plants.
• No-Objection Certificate for leased land mortgage to NDDB.

Institutional/Governance Criteria:

• Duly constituted governing body (board of Directors or management committee).
• Full-time CEO/Managing Director and qualified personnel in critical positions.
• No Director with defaults to any bank/financial institution on the board.

Application Process

To apply for funding from DIDF, follow these steps:

• Understand the eligibility criteria.
• Eligible borrowers prepare a Detailed Project Report (DPR).
• Submit the DPR to the Regional office of the National Dairy Development Board.
• The DIDF board reviews your application.
• If approved, funding is provided based on the DIDF schemes.

Software Technology Park (STP)

The STP is designed for 100% export-oriented activities, focusing on boosting the export of computer software and technical services. The unique course material emphasizes one business area, mainly computer software. This government initiative aligns with the concept of Export Processing Zones (EPZ) and the global practice of Science Parks or Technology Parks.

It offers startups a conducive ecosystem with infrastructure, resources, support services, and networking opportunities, enabling them to accelerate their growth, innovate, and thrive in the competitive technology landscape.

Benefits of the Scheme for Startups

• STP units can be established anywhere in India.
• STPI authorities can clear projects below Rs. 100 million with Indian investment.
• 100% foreign equity is permitted.
• Duty-free imports for hardware and software, including second-hand capital goods. Re-export of capital goods is allowed.
• Simplified Minimum Export Performance norms for positive net foreign exchange earnings.
• Use of computer systems for commercial training within STP premises is allowed.
• Sales in Domestic Tariff Area (DTA) permitted up to 50% of export value. Tax benefits for capital goods purchased from DTA.
• Repatriation of foreign investment and related fees is allowed after payment of income taxes.
• Donation of computers and peripherals to recognized institutions is duty-free after two years.
• 100% depreciation on capital goods over a five-year period.

Eligibility Criteria for Startups Applying to this Scheme

Eligible applicants for STPI Registration under the Software Technology Park Scheme include:

• An Indian company;
• A branch office of a foreign company;
• A subsidiary of a foreign company.

Application Process

The process of Software Technology Park of India (STPI) registration in India involves multiple steps:

• Submitting the application in the prescribed form to the Software Technology Park of India.
• Providing legal documents, including the Memorandum of Association, with the application.
• Including a Board Resolution confirming the establishment of the STP unit, signed by authorized individuals.
• Submitting the resume of the CEO or the person leading the operation.

eBiz Portal

eBiz, developed by Infosys, is the pioneering online platform for government-to-business collaboration (G2B). IT serves as a central communication hub for business investors and entrepreneurs in India. Currently, the platform offers 29 services in five Indian states: New Delhi, Tamil Nadu, Andhra Pradesh, Haryana, and Maharashtra. The government plans to progressively expand the services of this scheme in the future.

It aims to create a more conducive environment for startups in India by reducing regulatory burdens and facilitating access to essential services and information.

Benefits of the Scheme for Startups

• It is a one-stop for 24/7 G2B services and information.
• It provides universal payment gateway streamlines transactions and it generates reports.
• Its unified application system reduces procedures, saving time and costs.
• Online platform facilitates easy form submission, tracking, and document download.
• e-Biz simplifies access to business information, eliminating red tape and regulatory delays.

Eligibility Criteria for Startups Applying to this Scheme

• Individuals who have enrolled as sellers on an e-commerce platform, offering products online, and possess a minimum six-month history with any of the prominent e-commerce platforms are qualified for the benefits of SME eBiz Loan.

Application Process

The process of application on e-Biz portal in India involves multiple steps:

Individual Registration:

• Visit the eBiz portal homepage here.
• Click ‘Register’ under Individual Member Registration.
• Enter personal details, create a user id and password.
• Verify with a security check and accept terms.
• Confirmation page appears – click ‘Ok.’

Business Registration:

• On the eBiz homepage, click ‘Register’ (New User or Business).
• Log in with individual user id and password.
• Provide organization details and proceed.
• Confirm digital signature, accept terms, and submit.
• Confirmation page appears – click ‘Ok.’

Applying for IL/IEM Services on eBiz Portal

• Log in and click ‘Upload and Submit Form.’
• Select the form and fill the required information.
• Choose the office, sub-region, and proceed.
• Confirm the office selection.
• Confirm the invoice details and proceed with payment.
• Track the application status for updates.

Employers Registration with ESIC on eBiz

• Log in and select ‘ESIC Registration’ under ‘Services.’
• Download the application form.
• Fill the form and upload it on ‘Submit Forms.’
• Confirm the invoice details.
• Make online payment through the gateway.
• Check the application status.
• Download the Registration Certificate when confirmed.

Online Payment on eBiz Portal

• After form submission, proceed to payment.
• Choose payment mode and bank.
• Redirect to bank site – enter credentials.
• Confirm payment on the gateway.
• Return to eBiz and view the payment receipt.
• Check the receipt under ‘Payment History.’
• Process completed – receipt available.

Offline Payment on eBiz Portal

• Choose offline payment mode.
• Select bank and click ‘Pay.’
• Print the challan and acknowledgment receipt.
• Make payment at the Central Bank branch.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Established on January 1, 2000, the CGTMSE by the Indian government enables micro-level businesses, small-scale industries, and startups to access collateral-free business loans with subsidized interest rates. In partnership with the SIDBI, it offers loans up to INR 100 lakhs for new ventures and existing businesses, primarily in manufacturing.

As of March 30, 2023, an Rs. 8,000 crores injection into CGTMSE’s corpus has been made, along with recommendations to reduce the annual guaranteed cost for loans up to Rs. 1 crore from 2% to as low as 0.37% per year.

Benefits of the Scheme for Startups

• CGTMSE provides credit guarantees to financial institutions.
• Eligible borrowers can access collateral-free loans up to a specified limit.
• Flexible loan tenure based on the nature of the business.
• Wide coverage across various sectors of the economy.
• Mitigates the collateral obstacle for micro and small enterprises.
• Offers competitive interest rates on loans.
• Encourages financial institutions to provide credit to high-risk businesses, promoting economic development.

Eligibility Criteria for Startups Applying to this Scheme

The CGTMSE scheme is designed for micro and small enterprises involved in diverse sectors and activities. To qualify, a business must meet the following criteria:

• Classified as a micro or small enterprise.
• The proposed business activity should not be in the negative list of the scheme.
• The business owner must possess the necessary skills and experience in the specific sector.
• Compliance with all statutory and regulatory requirements is essential.

Application Process

Applying for a loan under the CGTMSE scheme involves the following steps:

• Choose a participating financial institution, such as a bank or NBFC.
• Gather required documentation, including business plans and financial statements.
• Submit your application and documents, ensuring compliance with eligibility criteria.
• The financial institution evaluates your application, considering your business plan and CGTMSE eligibility.
• The institution applies for a CGTMSE guarantee upon approval, reducing risk.
• After guaranteed approval, and meeting all requirements, the loan is disbursed to your business.
• Repay the loan based on the agreed-upon terms and conditions.

Concluding Remarks

Government initiatives supporting startups in India have spurred innovation, entrepreneurship, and economic growth. These programs provide financial backing, mentorship, and skill development, empowering individuals to transform business ideas into successful ventures. The ripple effects include job creation, sectoral growth, and a dynamic entrepreneurial ecosystem. As these schemes evolve, their ongoing impact is crucial for sustainable development, fostering innovation, and ensuring national prosperity. Entrepreneurs are encouraged to explore these resources for startup success.