New Delhi : Government on Monday announced a slew of initiatives in the Budget for startups, including 100 per cent tax exemption for three years and allocation of Rs 500 crore for SC/ST and women entrepreneurs, aimed at facilitating growth for these new businesses.
“It is proposed to provide a deduction of 100 per cent of the profits and gains derived by an eligible startup from a business involving innovation development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property,” Finance Minister Arun Jaitley said while announcing Union Budget 2016-17 in Parliament. This benefit will be available to an eligible startup which is setup before April 1, 2019, he added.
Similarly to promote innovation, a special patent regime has been proposed with a 10 per cent rate of tax on income from worldwide exploitation of patents developed and registered in India.
Under the ‘Start Up India Action Plan’, the proposal is also to establish a ‘Fund of Funds’ which intends to raise Rs 2,500 crore annually for four years to finance the startups. Besides, the Budget allocates Rs 500 crore for scheduled caste, scheduled tribes and women entrepreneurs in the Budget under the Stand Up India scheme.
Subho Ray, President of Internet and Mobile Association of India said the move will help startups with better incubation, talent and capital. “The ease of registration process and the hope to complete the task in one day is a welcome measure along with the three year tax holiday for startups,” Practo founder and CEO Shashank ND added. However, some startups also found some announcements to be “mere lip service”.
“I see a lot of announcements mere lip service vs making any actual on ground difference. For example, most large technology based scalable companies require heavy upfront investments and do not make any profits in first few years so, the tax holiday is not going to be very helpful… A lot more needs to change to actually facilitate the startup ecosystem in the long run,” Shimply.com founder and CEO Rajat Garg said. Anurav Rane, CEO and founder of PlanMyMedicalTrip.com added that while efforts by the government are really appreciated, it’s disheartening to see “categorisation of startups basis caste”. Another positive step seen is the proposed lowering of corporate income tax rate for the next financial year of companies with turnover not exceeding Rs 5 crore to 29 per cent plus surcharge and cess.−PTI
