India has been an attractive destination and these new announcements to exempt capital gain tax would attract most of those foreign investors who prefer the Mauritius route where they are exempt from capital gains tax because of a provision in the Double Tax Avoidance Treaty….writes Vijay Goel & Praveen Pandey
Indian Prime Minister Narendra Modi introduced Start-up India. This is most ambitious initiative of NDA Government in India to bring young entrepreneurs, venture capitalists and policymakers under one roof. For starters, the government has created as INR10,000 crore (appx. £1 billion) fund of funds for start-ups. It will also create credit guarantee schemes for loans to start-ups.
It is for the first time that GOI has recognised the importance of domestic venture capital and in order to encourage industry which is vastly dependent on foreign institutional investors (FII) the GOI has created as INR10,000 crore (appx. £1 billion) fund of funds for start-ups. This fund of funds will invest in venture capital funds registered with markets regulator Securities and Exchange Board of India (Sebi). This will encourage and stimulate the growth of the domestic venture capital industry.
India has been an attractive destination and these new announcements to exempt capital gain tax would attract most of those foreign investors who prefer the Mauritius route where they are exempt from capital gains tax because of a provision in the Double Tax Avoidance Treaty.
The start-up initiative of GOI has been received with a great enthusiasm and we are already hearing about positive participation from funds across the world, for example, one of Silicon Valley venture capital has launched a new fund for SaaS start-ups in India called Storm India SaaS Fund. The firm has allocated at least $10 million to the Storm India SaaS Fund and plans to increase that amount.
These are early days and there will be more funds joining this incredible initiative of GOI to encourage entrepreneurship among innovators of India. Gone are the days when entrepreneurship was neglected in the name of ‘jugaad’. The aspirations and innovation of entrepreneurs is now encouraged and they have a great opportunity to establish for themselves and contribute to success of India in twenty first century.
Start-up India – Highlights
- The government will establish a start-up hub as a single point of information and mentoring for start-ups.
- A mobile app to be launched on April 1, 2016 for registration and interaction with the government and regulators.
- Setting up of 31 start-up centres across the country.
- There will also be a portal for clearances, approvals and registration.
- Self-certification for 9 environment and labour laws for 3 years to reduce regulatory burden.
- Plans to introduce no income tax for start-ups that have a profit in the first 3 years.
- The fund of funds will be released in 4 equal yearly trenches of INR 2,500 crore (appx. £250 million) per year for 4 years.
- Government will set up a credit guarantee fund of INR 500 crore (appx. £50 million) per year for 4 years.
- Capital gain tax exemptions for investors to a registered fund of funds.
- Tax exemptions for incubators.
- There will also be sector-specific incubators for start-ups and new bio clusters for start-ups in the bio-technology sector.
- Launch of Atal Innovation Mission (AIM) and Self-employment and Talent Utilisation (SETU) as platform for innovation hub.
- Start-up Intellectual Property Protection (SIPP) to simplify IP protection. The government will be offering 80 per cent rebate on patent filing applications.
- Amendments to insolvency rules to provide faster exit in case of failure.
- Further consideration to encourage participation of start-ups in government procurement tenders.
- Award of INR 10 lacs (appx. £1,000) to 20 students under National Initiative for Developing and Harnessing Innovations (NIDHI) scheme to promote a culture of innovation among students.
- To encourage collaboration and raise visibility, Government will organise start-up fests.
- It will also bring in new policies to help in women entrepreneurs.