The Central Government has approved the ‘Startup India Seed Fund Scheme (SISFS)’ to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
The SISFS shall provide financial assistance to startups via corpus of Rs. 945 Crore that will be disbursed through selected incubators across India in 2021-25.
The eligibility criteria for the financial assistance under this scheme is that the a startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application, startup must have a business idea to develop a product or a service with market fit, viable commercialization, and scope of scaling; Startup should be using technology in its core product or service, or business model, or distribution model, or methodology to solve the problem being targeted.
Any startup will not receive seed support more than once each as per provisions of guidelines.
The government has announced that the preference would be given to startups creating innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles, etc.
“Startups should not have received more than Rs 10 lakh of monetary support under any other Central or State Government scheme. This does not include prize money from competitions and grand challenges, subsidized working space, founder monthly allowance, access to labs, or access to prototyping facilities,” the government prescribed.
Shareholding by Indian promoters in the startup should be at least 51% at the time of application to the incubator for the scheme, as per Companies Act, 2013 and SEBI (ICDR) Regulations, 2018.
The government elaborated on the disbursement of Seed Fund to Startups by Incubators.
Firstly, up to Rs. 20 Lakhs as 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 development of prototype, product testing, building a product ready for market launch, etc.
Secondly, up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments
Lastly, seed fund shall strictly not be used by startups for the creation of any facilities and shall be utilized for the purpose it has been granted for.
An Experts Advisory Committee (EAC) will be constituted by DPIIT, which will be responsible for the overall execution and monitoring of the Startup India Seed Fund Scheme. The EAC will evaluate and select incubators for allotment of Seed Funds, monitor progress, and take all necessary measures for efficient utilization of funds towards fulfillment of objectives of Startup India Seed Fund Scheme.
The Government shall evaluate the outcome of the scheme by the end of 2024-25, especially with reference to financial, social, and economic returns.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in
