India vows to become a start-up nation

India vows to become a start-up nation

By SHAILENDRA TYAGI | New Delhi | 16 January, 2016
The Prime Minister has announced that a start-up company’s profits would be exempted from paying tax in its initial three years.

Promising greater ease to start or to wind up a company and making investments in Indian start-ups fiscally attractive for investors, the government launched its much talked about Start-up India campaign envisioned by Prime Minister Narendra Modi to unleash the entrepreneurial spirit of the Indian youth. With the aim to boost entrepreneurship at the grassroot level, this policy push reflects the government’s commitment towards creating an ecosystem conducive enough for the growth of Indian start-ups. “The youth should aspire to become a job creator,” said the Prime Minister while unveiling the start-up action plan. He announced a self-certification compliance structure for the start-ups. A start-up can now self certify that it is complying with labour and environmental regulations and would not be inspected for the three initial years. The PM also announced that a start-up’s profits would be exempted from paying tax in its initial three years. Start-ups would not be asked about their turnover or experience while doing business with the government, said Prime Minister.
Creating a business environment with minimal state regulations and where the government only acts as a facilitator, the start-up policy is “a break from the conventional license raj which would eventually free businesses from state intervention duly supported by a friendly tax regime,” said Finance Minister, Arun Jaitley while launching the programme. The fact that the Prime Minister of the country recognises the criticality of start-up culture in creation of jobs in itself reflects a big policy shift undertaken by the government.  A vibrant start-up culture is likely to create over 11,000 start-ups in the next five year while creating about 2.5 lakh jobs.    
Besides demanding administrative ease to open up a new company in India, new age companies have also been expecting fiscal incentives for investors who fund them in their different stages of evolution. By recognising that funding remains a key challenge for starting a new company, the government has rightly incentivised funding for start-ups. “The idea behind asking for such tax breaks is to present start-ups as an alternative and attractive investment options among Indian investors,” says Gautam, Sinha, a seed investor and the CEO and co-founder of Cross Border Recruiter Exchange (CBREX). “Want of taxation benefits have been pushing Indian entrepreneurs to register themselves in Singapore,” says Harminder Sahni of Wazir Advisors.
Today hardly 1,500 people invest in Indian start-ups. India has a large professional class looking for investment avenues. Capital gain benefits would encourage these professionals to park some of their investments in start-ups. Since start-ups require a lot of risk capital especially in the beginning, such benefits would create a vibrant investors community among Indian investors. America also rewards investors who funds start-ups there. The government has also decided to reward Indian companies who invent things in India. “If we want Indian start-ups to become the next Google or Facebook, they should be encouraged to file for patents in India,” says Sinha.
Analysts say that India is indeed brimming with entrepreneurial spirit to make this mission a grand success. Moreover, the huge size of the Indian markets is the biggest plus for energising Indian start-ups. The fact that there are about 400 million netizens in India coupled with billion mobile phone connections, gives us an idea about the mammoth size of the Indian market that Indian new age entrepreneurs are expected to benefit from.
 

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