Narendra Modi announces Rs 10,000 crore govt fund for startups
The Prime Minister said a hub for start-ups would be carved out for hand-holding as 'a single point of contact'.
New Delhi: Prime Minister Narendra Modi on Saturday announced a 19-point action plan to “unleash a start-up revolution” in the country, granting new entrepreneurs exemptions from income-tax and “inspector raj” for three years, no capital gains tax and a Rs 10,000-crore fund for new entrepreneurs.
Addressing over 1,000 global and domestic start-up chief executives at Vigyan Bhavan here, the Prime Minister said that to simplify registration start-ups would only have to provide self-certification for nine labour and environment laws.
Promising zero interference from government, Mr Modi said there will be no inspection during the first three years of the venture. Mr Modi said a hub for start-ups would be carved out for hand-holding as “a single point of contact”.
The Prime Minister said amidst applause by start-up CEOs that profits earned by start-ups will be exempt from payment of income-tax in the first three years of business.
To help start-ups get financing, they and government-recognised venture capitalists would be exempt from a 20 per cent tax on capital gains made on investments by entrepreneurs after selling their own assets.
Mr Modi announced the setting up of a dedicated fund of Rs 10,000 crore to provide both equity and debt support, with Rs 2,500 crore each year for the first four years.
He also proposed a credit-guaranteed fund for start-ups with contribution of Rs 500 crore a year. To help a start-up get government contracts, the Centre will remove the criteria of experience and turnover for public procurement contracts.
Mr Modi said those who try to set up new businesses can also fail and that the government would provide them an option for easy exit under the proposed bankruptcy law. Under this proposed act, start-ups can exit within 90 days.
Mr Modi said that it is important that start-ups are able to safeguard their intellectual property and, for this, patent fees would be slashed by 80 per cent.
The government will also look at the possibility of getting new businesses the services of patent advocates for free. The government will also soon announce a special scheme for women entrepreneurs.
A mobile app and portal will be rolled out for interacting with the government and regulatory institutions. Tax exemption will also be given on investments above fair market value. At present, if a start-up receives equity funding that exceeds the firm’s fair market value, then such excess consideration is taxable in the hands of recipients.
Many start-ups were excited about the Prime Minister’s initiative. “The policies around cleaning up licence raj will be a huge booster for the start-up community, while both setting up and dissolving a company,” said Radhika Aggarwal, co-founder of Shopclues. “Listening to the action plan today I am most excited about the tax exemptions, which will release the maximum burden on a start-up like us,” said Puja Bansal, founder and director, Myheera.com. Saurabh Arora, CEO, Lybrate, said measures like single-point contact, patent protection, creation of funds and, on top of all, tax incentives would provide a huge boost to the entire start-up ecosystem and propel them to the next level.