No income tax on start-up profits for first three years: PM Modi

Also on cards: Exemption from capital gains tax, Rs 10,000 crore dedicated fund, 80% reduction in patent fees

Prime Minister Narendra Modi announced a slew of measures for start-up companies in New Delhi on Saturday, while unveiling the action plan for the sector.

Start-ups will not be required to pay income tax on their profits for the first three years, and will also be exempt from capital gains tax.

In order to simplify the process of registration, the PM proposed a system of self-certification on the part of such enterprises, with an additional provision of no inspection for three years. Modi had earlier stressed on the government giving a freer hand to enterprise in the country and had said, "Start-up is more about what the government should not do, than what it has been doing." In a lighter vein, he even wondered why a tea-seller like him didn't think of starting a hotel chain.

Emphasising the need to take risk for a business to thrive, Modi said that it was because Columbus set out in 1423 to explore uncharted territory that he was able to give the Spice Route to the world.

SALIENT FEATURES OF START-UP ACTION PLAN

Self-certification to simplify registration, no inspection for three years on labour, green compliance

Start-up India Hub to provide single-point access, can also done via mobile app

Patent fees to be slashed by 80%

Credit guaranteed fund for start-ups

Profits not taxable for first three years

No Capital gains tax

Rs 10,000 crore fund for start-ups on cards

Bankruptcy Bill to be introduced in Parliament for faster winding up

Incentives to start-ups based on turnover, experience

Sector specific incubators on the cards

Special schemes for women entrepreneurs on cards

However, he was quite clear that those who start with the objective of earning money rarely succeed; money is only a by-product. According to him, a start-up is born when there is a compassionate need to serve society. In this connection he recalled urging some aerated drink-manufaturing companies to set aside 2-5 per cent of their resources to make bottled natural fruit juices.

Modi also called upon Entrepreneurs to address issues like affordable health care, and said that if the country has a million problems, it even has a billion minds.

The Prime Minister also dwelt on the need to encourage more start-ups, not just those working around IT. Besides, start-ups aren't about doing billion dollars worth of business. Modi said that if an enterprise provides livelihood to even five people, it is contributing to the nation's progress. He added that start-ups can change the mindset from job seeker to job creator.