Budget 2016: The Union Budget has delivered a mixed bag for the startup community with exemption of taxes on profits for three of the first five years acting as a boost even as the imposition of minimum alternate tax (MAT) has come as a dampener.
Budget 2016: The Union Budget has delivered a mixed bag for the start-up community with exemption of taxes on profits for three of the first five years acting as a boost even as the imposition of minimum alternate tax (MAT) has come as a dampener.
Union finance minister Arun Jaitley announced a 100% exemption of taxes on profits for three out of the first five years for start-ups set up between April 2016 and March 2019. Additionally, the government has promised to simplify the procedure of registration of start-ups so that the exercise can be completed in one day.
However, the imposition of MAT at a minimum rate of 18.5% comes as a huge setback. Ravi Gururaj, chairman of the Nasscom Product Council, told FE, “In January it was felt that a tax
holiday may be introduced for two years. MAT was not mentioned at all in January during the Start-up India launch. The implementation of MAT is disappointing.”
He also noted that the period for getting benefits of the long-term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years. He felt that start-ups could have been treated on a par with listed companies in this regard as it would have encouraged investors.
India is the third largest start-up hub globally with more than 4,200 such entities in the country. It is projected that this segment is going be the biggest employment generator in the country in the near future.
However, start-up companies have welcomed the proposals to ease the registration process, digitise land records, create a digital depository to store school and college certificates, and procure agricultural produce though the e-route, saying they will open up avenues for them.
“Easing the registration process so that the task can be completed in one day is a welcome measure. This will provide a speedy way to set up a venture and help start-ups focus on building disruptive products and services without worrying about profits or losses,” Shashank ND, founder and CEO of healthcare start-up Practo said.
However, the Krishi Kalyan Cess of 0.5% on all taxable services will be an added burden, particularly for those in the food delivery and transportation business. The Budget has also proposed a special patent regime with 10% tax on income generated from patents developed and registered in India. This is likely to check the re-domicile of start-ups.
On research and development, Govind Rajan, COO, FreeCharge, said, “We are excited about the government’s push for R&D. An 80% discount on filing of patent applications by start-ups will further home-grown innovations from their stable.”
Bhavish Aggarwal, co-founder and CEO, Ola, said, “It was quite encouraging to see the FM address some key road transportation issues and set aside requisite budget for infrastructure development. Creating space for entrepreneurship in the public transportation space and proposing amendments in the Motor Vehicles Act to allow for innovations will ensure better mobility for citizens.”
TAGS: Arun JaitleyUnion Budget 2016-17