Startup India

Declaring that true entrepreneurs were not money-chasers but those possessed by a sense of empathy to solve problems, Prime Minister Narendra Modi rolled out the red carpet for Indian startups, promising them tax breaks, simplified procedures and freedom from inspector raj.
He said the government would as far as possible try and stay out of the way of startups, as he exhorted young entrepreneurs to try and solve India's big problems, scale up the spirit of `jugaad' endemic to the country and become job creators.
“Startup does not mean billion dollar revenues and thousands of workers. Even if a startup gives employment to five, that will take India forward,“ the prime minister said in a speech punctuated by spells of laughter as the audience lapped up his wisecracks on himself, government functioning and the opposition for stalling legislations.
Modi's speech was the grand finale of the day-long Startup India event, the first of this kind and scale organised by the government targeted at India's white-hot startup ecosystem. The day saw back to-back sessions featuring some of the biggest names in the startup world, notably Uber founder Travis Kalanick, SoftBank's Masayoshi Son and Nikesh Arora and founders of Indian unicorns such as Flipkart, Snapdeal, Ola, Paytm and ShopClues.
Startup activity has been on a roll in the last couple of years in India, attracting the attention of big name investors from Silicon Valley and propelling valuations of several young companies in billions of dollars.
Most of India's startup successes have been around the world of technology or use technology as a key differentiator. Modi urged Indian entrepreneurs to think of solutions outside the world of IT and also tackle India's fundamental problems. “Startup founders' success is not just about entrepreneurship...It's about risk taking, a spirit of adventure... A startup entrepreneur has a sense of empathy when he sees a problem. That does not let him sleep.He wants to create a solution,“ he said, urging entrepreneurs to tackle problems faced by India's farmers and artisans.
On its part, the government would do all it can to make life easy for startups, he said, as he unveiled its much awaited Startup Action Plan that promises no tax on profits for the first three years, no capital gains tax on assets sold to fund a startup, a self-certification-based compliance system for new firms, no inspection for three years and a single-point interaction hub.
The prime minister also said the government would have a Rs.10,000 crore fund for startups, financed by annual contributions of Rs.2,500 crore for four years and another Rs.2,000-crore credit guarantee fund for the sector. Startups would get a role in government procurements, get a 80% cut in patent registration fees and the government would also have an exit policy for startups to get out of failed businesses, he said.

The three-year tax holiday proposed for startups in India will be available over a five year window, ensuring that innovators won't lose the benefit even if they make a profit later, the government said.
Those seeking the income tax exemption, announced in the Startup Action Plan on Saturday , will need to get approval by March 2019, in line with the government's policy to weed out exemptions and bring down the corporate tax rate to 25%. Startups approved until March 31, 2019, will enjoy the benefit for up to five years. The government has pro posed that a high-level, inter-ministerial committee should vet startup proposals to validate the innovative nature of the business for granting tax-related benefits.The details of the tax benefits will be announced in the budget.
“The benefit will be available for three years over a five-year period,“ a senior government official said. If a startup claims the benefit in the first year and does not have a profit in the next two years, it will not lose out on the exemption. If profits are made in the fourth and fifth year, they will still be eligible for the tax break. “All startups incorporated in India not prior to five years as per the definition of startup and starting the operations before 2019 can get this benefit for three years,“ said Amitabh Kant, secretary in the Department of Industrial Policy and Promotion, which piloted the startup initiative.
With the deadline for seeking exemption set for March 2019, the scheme will effectively run till March 2024, a period of eight years from now. “This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations,“ according to the action plan document.
The policy imposes only one condition on startups claiming the benefit, apart from seeking approval from the appropriate body and meeting eligibility criteria: it should not distribute dividend while getting the tax exemption.