Capital Redemption Reserve: Definition, Uses, Tax Benefits & More

Apr 15, 2025
Private Limited Company vs. Limited Liability Partnerships

The Capital Redemption Reserve (CRR) is a statutory reserve that companies create when redeeming preference shares. It ensures financial stability by retaining an equivalent amount of capital in the business, safeguarding creditor interests and maintaining compliance with regulatory requirements.

This blog explores the definition, usage, tax benefits, and legal framework surrounding the Capital Redemption Reserve.

Table of Contents

What Is Capital Redemption Reserve?

The Capital Redemption Reserve (CRR) is a special reserve that a company must create when it redeems (buys back) its preference shares using its profits. As per corporate law, companies must transfer an amount equal to the nominal value of redeemed preference shares to the CRR to prevent capital reduction and maintain financial integrity.

When Is Capital Redemption Reserve Used?

CRR is utilised in various financial scenarios to maintain corporate stability, including:

  • Issuing bonus shares: CRR can be used to issue fully paid bonus shares to shareholders.
  • Funding share redemption: Ensures funds are available for preference share redemption.
  • Capital reconstruction: Helps restructure a company’s capital without impacting free reserves.
  • Balancing capital losses: Used in cases where capital losses need adjustment.
  • Source for share buybacks: Required when companies buy back shares using free reserves.

Redemption Of Preference Capital

The redemption of preference shares is subject to the following regulations:

  • Must be permitted in the Articles of Association.
  • Redeemable within 20 years of issue.
  • Methods of redemption:
    • Using Distributable Profits: Requires CRR creation.
    • Issuing Fresh Shares: CRR creation is not required if new capital is issued.
  • Shareholder Approval (75%): Required for further preference share issues.
  • Premium Payment: This can be funded from company profits or the securities premium account.

Modes of Redemption

The three primary modes of redemption are:

  1. Using Distributable Profits: CRR creation is mandatory, equal to the nominal value of redeemed shares.
  2. Issuing Fresh Capital: If a company issues fresh capital equal to the redemption amount, CRR creation is not required.
  3. Combination of Both: CRR is required only for the portion funded through distributable profits.

Modes of Redemption of Preference Shares

Companies can redeem (buy back) preference shares using one of the following methods:

  1. Using Distributable Profits
    The company uses its retained earnings or other profits to redeem the shares. In this case, it must create a Capital Redemption Reserve (CRR) equal to the nominal value of the redeemed shares to maintain financial stability.
  2. Issuing Fresh Capital
    The company raises funds by issuing new shares to replace the redeemed preference shares. Since this method does not reduce capital, creating a CRR is not required.
  3. Combination of Both
    A company may use both profits and fresh capital for redemption. CRR is required only for the portion funded through distributable profits, while the part covered by fresh capital does not require CRR.

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Calculation and Accounting Entries For Capital Redemption Reserve

Calculation of CRR

CRR = Nominal Value of Redeemed Preference Shares (if using distributable profits)

Journal Entries

Application of Capital Redemption Reserve

  • CRR can only be used for issuing fully paid bonus shares.
  • CRR cannot be used for dividend distribution.
  • CRR must exclude unrealised gains and self-generated intangible assets before determining free reserves.
  • Classified as a statutory reserve, separate from revenue reserves.

Companies Act and Capital Redemption Reserve

  • Section 55: Companies redeeming preference shares from profits must transfer an equivalent amount to CRR.
  • Section 69: Companies buying back shares using free reserves or securities premiums must transfer an amount equal to the face value of bought-back shares to CRR.

Difference Between Capital Redemption Reserve and Other Reserves

Feature Capital Redemption Reserve General Reserve Revenue Reserve Revenue Reserve
Purpose Preference share redemption Financial stability Operational expenses Long-term capital gains
Mandatory creation Yes No No No
Usable for dividend No Yes Yes No
Usable for bonus shares Yes Yes No No

Tax Benefits For Capital Redemption Reserve

Under Section 36(1)(viii) of the Income Tax Act, 1961, specified entities can claim a tax deduction on contributions to a Special Reserve, reducing their taxable income. The deduction is capped at 20% of profits from eligible business activities before applying this clause. However, any future withdrawal from the reserve is treated as taxable income in the year of withdrawal.

Importance Of Capital Redemption Reserve

  • Maintains Financial Stability: Prevents a reduction in share capital.
  • Protects Shareholders’ Interests: Ensures capital is available for redemption.
  • Supports Capital Restructuring: Used in financial restructuring strategies.
  • Ensures Legal Compliance: Meets regulatory requirements under the Companies Act.
  • Enhances Investor Confidence: Used for issuing bonus shares, benefiting shareholders.

Final Thoughts

The Capital Redemption Reserve (CRR) plays a vital role in corporate finance by ensuring companies retain sufficient funds while redeeming preference shares. As a statutory reserve, it helps maintain financial stability, protects creditors' interests, and complies with legal requirements.

While it cannot be used freely like other reserves, its role in issuing fully paid bonus shares makes it a strategic asset for companies looking to optimise their financial position.

Frequently Asked Questions

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Limited Liability Partnership
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  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
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  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is the source of the Capital Redemption Reserve?

The Capital Redemption Reserve (CRR) is created from a company's distributable profits (such as retained earnings or general reserves) when it redeems preference shares. If shares are redeemed using fresh capital issuance, CRR is not required.

What is the difference between a Capital Redemption Reserve and a Debenture Redemption Reserve?

  • Capital Redemption Reserve (CRR): Created when a company redeems preference shares using distributable profits. It ensures financial stability and protects creditors.
  • Debenture Redemption Reserve (DRR): Created to ensure funds are available to repay debentures upon maturity. Unlike CRR, DRR is specific to debenture repayment obligations.

What is CRR in Preference Shares?

CRR is a statutory reserve that a company must create when redeeming preference shares using distributable profits. It ensures the company maintains its financial strength and does not reduce its capital base.

How is CRR created?

CRR is created by transferring an amount equal to the nominal value of redeemed preference shares from distributable profits (like retained earnings or general reserves) to a separate Capital Redemption Reserve account.

Which amount is transferred to the Capital Redemption Reserve?

An amount equal to the face (nominal) value of the redeemed preference shares is transferred to CRR when redemption is done using distributable profits. If redemption is done using fresh issue proceeds, no CRR transfer is needed.

Is Capital Redemption Reserve a distributable reserve?

No, CRR is not a distributable reserve. It cannot be used for dividend distribution or general business expenses. It can only be utilised to issue fully paid bonus shares to shareholders.

Is Capital Redemption Reserve a free reserve?

No, CRR is not a free reserve. Free reserves can be used for dividends or other business purposes, whereas CRR is restricted to bonus share issuance and cannot be utilised for any other purpose.

What are the conditions for the redemption of preference shares?

No, CRR is not a free reserve. Free reserves can be used for dividends or other business purposes, whereas CRR is restricted to bonus share issuance and cannot be utilised for any other purpose.

  1. Authorisation in Articles of Association (AOA): The company must have permission in its AOA to redeem preference shares.
  2. Redemption within 20 Years: Except for certain cases (like infrastructure companies), preference shares must be redeemed within 20 years of issuance.
  3. Fully Paid Shares: Only fully paid-up preference shares can be redeemed.
  4. Redemption Sources: Shares can be redeemed using distributable profits (requiring CRR creation) or by issuing fresh capital (no CRR required).
  5. Shareholder Approval: If a company wants to issue new preference shares post-redemption, it needs 75% shareholder approval.
  6. Premium Payment: If shares are redeemed at a premium, the premium must be paid from profits or the securities premium account.

Related Posts

LLP Names Suggestion: Acceptable Name for Company or LLP

LLP Names Suggestion: Acceptable Name for Company or LLP

Choosing the right name for your Limited Liability Partnership (LLP) or company is a crucial step in business registration. Under the Companies Act 2013, your business name must comply with legal guidelines, ensuring it is unique, relevant, and free from restricted or misleading words. A well-chosen name enhances brand identity while meeting regulatory requirements.

The Registrar of Companies (ROC) approves names based on availability and adherence to naming rules. Hence, before finalising a company name, you must conduct a name availability check to avoid rejections.

Table of Contents

Rules for Selecting Company Name Under the Companies Act

When you select a company name, it must comply with the Companies Act to ensure uniqueness and legal approval. Here are the key rules to follow:

Avoid Similar or Identical Names

Your company name must not closely resemble an already registered business. The ROC conducts a company name check, and if the proposed name is found to be too similar to an existing one, it will be rejected. For example, if "GreenTech Solutions Pvt Ltd" is already registered, "GreenTech Solution Pvt Ltd" may be rejected due to similarity.

Restriction on Certain Words

You cannot use words that suggest a connection with the Central or State Government, local authorities, or government bodies, unless prior approval is obtained. For instance, names like "India National Bank Ltd" or "Government Infrastructure Pvt Ltd" require special permissions.

Prohibited Expressions

Some words and expressions are restricted under Rule 8B of the Incorporation Rules. You must seek approval from the Central Government before using them in your LLP or company name.

Mandatory Suffix for Entity Type

The company name must clearly indicate its legal structure.

A Brief About Acceptable Name for LLP

An acceptable LLP or company name in India consists of three key components. The Name Part that gives the business a unique identity, such as "Bright" in Bright Solutions LLP. The Object Part that reflects the company's activity, like "Solutions" indicating a service-based business. The Constitution Part that defines the legal structure, such as "LLP" in Bright Solutions LLP.

Name Part

The Name Part is the unique and distinguishable element of a company or LLP name. It must comply with the Companies Act 2013 or the LLP Act 2008 and should not be identical or deceptively similar to existing companies, LLPs, or registered trademarks within the same industry. The ROC verifies the name to ensure distinctiveness and prevent duplication.

For example, a name like Bluewave Technologies LLP is acceptable because it is unique and clearly identifiable. However, Bluewave Tech LLP may be rejected as it closely resembles an existing name. Similarly, GreenVista Textiles Private Limited is a valid name, but Green Vista Private Limited may be considered too similar to an existing business and could face rejection. Ensuring a distinct name that does not match or closely resemble an existing company improves the chances of approval.

Object Part

The Object Part in a company or LLP name defines its primary business activity. It must be clearly stated to indicate the company's purpose and ensure compliance with naming regulations.

If two companies have similar name parts but different object parts, both names may still be approved, as long as they belong to distinct industries. However, names without a clear object part or with generic words like "dash Private Limited" are too vague and may be rejected by the ROC because it does not specify what the company does.

Related Read: Difference Between LLP and Partnership

Examples of Common Object Parts in Company and LLP Names

Company Name Object Part Reason
AAA Trading Private Limited Trading Clearly defines that the business deals in trade
AAA Hospital Private Limited Hospital Indicates a healthcare-related business, different from “AAA Trading”
Bright Textiles LLP Textiles Specifies that the company operates in the textile sector
GreenVista Construction Pvt Ltd Construction Shows that the company deals with construction activities
Sun Pharma Ltd Pharmaceuticals Clearly states that the company is in the pharmaceutical industry

Constitution Part

The Constitution Part indicates the legal structure of the business. It must match the type of entity being registered, ensuring clarity in compliance and business operations. Here are the specific terms which are used for different entities:

  • Private Limited Company (Pvt Ltd) - For privately held businesses
  • One Person Company (OPC) - For single-owner companies
  • Limited Company (Ltd) - For publicly listed businesses
  • Limited Liability Partnership (LLP) - For partnership-based entities with limited liability

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Minimum Authorised Capital For Certain Words

When registering a company, using specific words in its name requires meeting minimum authorised capital requirements as per the Companies Act 2013. Words like "Corporation," "International," and "Industries" have higher capital requirements to ensure that only financially strong businesses use them. This helps maintain credibility and prevents misuse of these terms by companies with limited resources.

Before you apply to register a company name, verifying the capital requirements is essential to ensure compliance and avoid rejection. The table below outlines the required minimum authorised capital for specific words:

Word Minimum Authorised Capital Required
Corporation ₹5 Crore
International, Globe, Universal, Continental, Inter-Continental, Asiatic, Asia (as the first word) ₹1 Crore
Industries / Udyog ₹1 Crore
International, Globe, Universal, Continental, Inter-Continental, Asiatic, Asia (used within the name) ₹50 Lakhs
Hindustan, India, Bharat (as the first word) ₹50 Lakhs
Enterprises, Products, Business, Manufacturing ₹10 Lakhs
Hindustan, India, Bharat (used within the name) ₹5 Lakhs

When Will Companies House Refuse to Register a Company Name?

Companies House may reject a name if it does not comply with legal guidelines. Below are the key reasons why a company name may be refused:

  • Identical or Too Similar to an Existing Name: If the proposed name is the same or closely resembles an already registered company, it will be rejected.
  • Offensive or Illegal Names: Any name containing offensive, abusive, or illegal terms will not be approved.
  • Implying Government Affiliation: Names suggesting an association with the government, public authorities, or international organisations require special approval.
  • Use of Sensitive Words or Symbols: Certain words, such as "Royal," "Bank," or "Trust," require prior consent before use.
  • Misleading Use of Business Terms: Using terms like "Limited" (Ltd.), "Public Limited Company" (PLC), or "LLP" incorrectly or misleadingly can lead to rejection.

Objections to Company Names

Even after registration, objections to a LLP or company name may arise if it does not comply with legal requirements. Ensuring that the name is unique and non-misleading is crucial to avoiding disputes. Common reasons for objections include:

  • Too Similar to an Existing Business: If a company name closely resembles another registered entity, the affected business can file an objection.
  • Misleading Information During Registration: If false or inaccurate details were provided while registering the name, objections may be raised.
  • Failure to Meet Registration Conditions: A name that does not adhere to naming regulations or lacks necessary approvals may face challenges.
  • Opportunistic Registration: If a name is registered to take advantage of another company’s goodwill, it can be legally disputed.

Related Read: How much does an LLP cost in India?

How to Check Company Name Availability Online?

Before registering a company, you must check whether the proposed name is available to avoid rejection. The Ministry of Corporate Affairs (MCA) portal provides an online tool to verify company name availability. Here’s a step-by-step guide to checking a company name online:

  1. Visit the MCA Website: Go to www.mca.gov.in.
  2. Access the Name Availability Tool: Under the ‘MCA Services’ section, select ‘For Services’ from the drop-down menu and then select ‘Check Company/LLP Name’.
  3. Enter the Proposed Name: Type the desired company name in the search box and click on the ‘Search’ button.
  4. Review the Results: The portal will indicate whether the name is available or already registered.

Additional Checks for Better Approval Chances

  • Trademark Search: Use the Razorpay Rize Name Search Tool to check for potential trademark conflicts.
  • Alternative Name Options: Verify multiple name options to avoid rejection and ensure compliance with naming rules.

Conclusion

Choosing the right company or LLP name is crucial for legal compliance and brand identity. Ensure the name is unique, relevant, and adheres to MCA guidelines to avoid objections. Conduct a thorough name availability check on the MCA portal and verify potential trademark conflicts before finalising a name. A well-chosen name not only simplifies registration but also builds a strong brand identity while ensuring long-term legal compliance.

Frequently Asked Questions

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Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are good names for a company?

A good company name is unique, relevant to your business, and easy to remember. It should comply with MCA guidelines and avoid restricted words.

How can I name my company?

To name your company, ensure it is distinctive, reflects your business activity, and follows MCA regulations. Use the MCA name availability tool to check if the name is already registered. Additionally, verify trademark availability to avoid conflicts.

Which name is the best for my company?

The best name for your company is one that aligns with your brand identity, business operations, and legal requirements. It should be simple, professional, and free from misleading or offensive words.

What should a company name be?

A company name should be unique, legally compliant, and descriptive of the business. It must include an appropriate suffix, such as Private Limited (Pvt. Ltd.) or Limited Liability Partnership (LLP), based on the entity type.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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Startup India Seed Fund Scheme for Startups | Razorpay Rize

Startup India Seed Fund Scheme for Startups | Razorpay Rize

As a part of the “Startup India” program, the Startup India Seed Fund Scheme was introduced in 2021 to facilitate the process of creating a robust startup ecosystem and providing financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.

Description Who is it for? Benefits
To provide monetary support for proof of concept, prototype development, product trials, market, and commercialization Startups using Technology as their core product or service Under this scheme, Financial assistance up to Rs. 50 lakh will be provided to startups at an early stage through incubators
Startup India Seed Fund Scheme

Table of Contents

Eligibility

  • Should be recognised by DPIIT.
  • Startups should not have received more than Rs 10 lakh of monetary support under other significant government schemes.
  • The Startup shall have been in existence for no more than two years at the time of application.
  • Should be using technology as its core product or service to create innovative solutions in different sectors.
  • Must have a business idea to develop the product with a scope of scaling
  • According to the Companies Act of 2013 and the SEBI (ICDR) Regulations of 2018, Indian promoters must own at least 51 percent of the company at the time of application to the incubator.
  • The seed support is generally available in grants and debt/convertible debentures.

Application procedure for Startups

The application procedure for availing the seed fund from the incubators by the startups under the StartUp India Seed Fund Scheme is as follows:

Startup India Registration

  • Go to https://seedfund.startupindia.gov.in/.
  • On the top right side of the homepage, click the 'Login' button, then the 'Create an Account' option at the bottom of the "Login" tab.
  • The ‘Startup India’ registration page will open.
  • After filling out the form, click the 'Register' button.
  • An OTP will be sent. Enter the OTP and click the ‘Submit’ button.

Startup India Seed Fund Application

  • Go to the website again and click on the ‘Apply Now’ button on the right-hand side of the homepage.
  • Click on the ‘Apply Now’ button under the ‘For Startups’ option and log in using the username and password registered.
  • The application form will open. Put in all the details, upload the documents, and click on the ‘Submit’ button.
  • The application will be submitted for the selection of the startup.

Selection of Startups for the Scheme

The Eligible Incubator will select startups for this scheme based on the following criteria:

  • Idea
  • Feasibility
  • Novelty
  • Fund Utilization Plan
  • Business Plan
  • Presentation
  • Potential Impact

Benefits

To register a company in the U.S., several essential criteria must be met.

  • Under this scheme, up to Rs 50 lakh in financial assistance will be provided to startups at an early stage through incubators.
  • The incubator will disburse the seed fund to an eligible startup:
    - As a grant for validation of “prototype development, proof of concept or product trials”-  
    Up to Rs. 20 Lakh        
    - Investment for commercialization, market-entry, or scaling up through debt-linked instruments -
    Up to Rs. 50 Lakh
  • Once incubated, physical infrastructure, testing support, mentoring for prototype or commercialization, human resources, and legal compliances are provided to the startups, all by the incubators.
  • For eligible startups, income tax and capital gains tax exemptions are available.

Post funding process

Each incubator must track specific criteria for each beneficiary startup. Every beneficiary startup must present the reports to its incubators periodically. The data is submitted to Startup India in real-time via their web dashboards and further to the EAC quarterly. Each Startup’s return on investment is also reported by the designated incubator.

  • Proof of concept
  • Prototype development
  • Progress of product development & field trials
  • Turnover of startup
  • Progress of market launch
  • Quantum of loan, angel, or VC funding raised
  • Jobs created by startup

Frequently Asked Questions

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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Top 8 Government Schemes for Startups in India- Razorpay Rize

Top 8 Government Schemes for Startups in India- Razorpay Rize

Starting a business comes with its fair share of challenges. Fortunately, the Indian government has recognized the importance of startups in driving innovation and economic growth, and they've rolled out a range of initiatives to support budding entrepreneurs like you.

In this blog, we're going to take you on a guided tour of these government schemes, offering insights into what they offer, who's eligible, and how they can benefit your startup.

Table of Contents

Why are Government Schemes important for Startups?

Government support plays a pivotal role in nurturing and sustaining startups for several reasons:

1. Access to Funding

  • Government-backed schemes and initiatives provide access to funding and financial assistance, which is crucial for startups, especially in their early stages of development.
  • These funds can help cover initial capital expenditures, research and development costs, and other operational expenses.

2. Regulatory Support

  • Governments often create favorable regulatory environments and offer incentives such as tax breaks, exemptions, and subsidies to encourage entrepreneurship and innovation.

3. Infrastructure Development

  • Government investment in infrastructure development, including technology parks, startup incubators, and innovation hubs, provides startups with access to essential resources, facilities, and networking opportunities.

4. Skill Development and Training

  • Government-sponsored programs and initiatives focus on skill development, entrepreneurship training, and capacity-building for aspiring entrepreneurs. By imparting essential business skills, knowledge, and mentorship, governments empower startups to navigate challenges effectively.

5. Market Access and Promotion

  • Government initiatives aim to facilitate market access for startups by promoting domestic and international trade, fostering industry partnerships, and facilitating market linkages through trade fairs, exhibitions, and business delegations.

6. Innovation and Research Support

  • Governments incentivize research and innovation through grants, subsidies, and funding programs aimed at supporting startups engaged in technology development, product innovation, and scientific research.

7. Job Creation and Economic Growth

  • Government support for startups leads to the creation of new job opportunities, stimulates economic activity, and contributes to GDP growth by fostering entrepreneurship, innovation, and productivity.

List of Government Schemes for Startups in India

Name of the Scheme Description Who is it for? Benefits
Startup India Seed Fund Scheme To provide monetary support for proof of concept, prototype development, product trials, market, and commercialization Startups using Technology as their core product or service Under this scheme, Financial assistance up to Rs. 50 lakh will be provided to startups at an early stage through incubators
Women Entrepreneurship Platform (WEP) To promote women entrepreneurship in the country by empowering them through financial aid and mentoring For Women Entrepreneurs Apart from providing incubation & acceleration, this scheme offers mentorship and financial and marketing assistance.
Pradhan Mantri Mudra Yojana (PMMY) To loan funds in the form of MUDRA for promoting MSMEs For small-scale businesses & MSMEs Business loans ranging from Rs. 50,000 to Rs. 10 lakh can be applied under this scheme, which is divided into three categories: Sishu, Kishor, and Tarun.
Promoting Innovations in Individuals, Startups and MSMEs (PRISM) To provide grants, technical advice, and mentorship to individual innovators, guiding them through the various stages of incubating their ideas until they transform into viable enterprises For Innovators in the technology area Upto INR 2,00,000 or 90% of the approved project cost for prototype or model development
Support for International Patent Protection in Electronics & Information Technology (SIP-EIT) To foster innovation by providing financial support to MSMEs and Technology Startup units for international patent filing For MSMEs and Technology startups A maximum reimbursement of Rs. 15 Lakhs per invention or 50% of the total charges incurred in filing and processing a patent application, whichever is lesser
Credit Guarantee Fund To improve the credit delivery system and make credit more accessible to small and medium-sized businesses For Micro and Small Enterprises Collateral-free loans up to a limit of Rs. 200 lakh are available for individual MSE
Startup Accelerators of MeitY for Product Innovation, Development, and Growth (SAMRIDH) To provide funding support to the tech and software startups with proof of concept & innovations For Tech & Software startups Under this scheme, startups can get funding of up to Rs. 40 lakhs based on current valuation and growth stage through selected accelerators.
Nidhi Seed Support System (NIDHI-SSS) To provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization, etc. For MSMEs and Technology startups Financial Support up to Rs. 100 lakhs per start-up as Seed Support

To conclude, the government of India has been actively participating in boosting the startup ecosystem, and numerous initiatives are launched each financial year to contribute to the growth of MSMEs. For detailed features, eligibility, process and benefits, visit the respective page for schemes and if you feel any of these schemes can give wings to your startup dreams, you can go through the given details and apply.

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One Person Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
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Basanth Verma
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Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

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TBS Magazine
Hey, Guys!
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