1. Budget 2016 Top View: Funding for start-ups is inadequate

Budget 2016 Top View: Funding for start-ups is inadequate

Budget 2016: Much was expected from the Budget for start-ups. At the Start-up India event, there was great excitement.

By: | Updated: March 1, 2016 10:19 AM
startup L The government’s allocation of Rs 1,100 crore for Start-up and Standup India is inadequate. The start-up industry had two sets of demands: (i) for ease of doing business; (ii) provision of tax incentives.

Budget 2016: Much was expected from the Budget for start-ups. At the Start-up India event, there was great excitement. For start-ups, exemption of tax for profits in three out of five years has been proposed (this is subject to MAT). This has limited utility as not many start-ups will have profits in the first five years. The government has proposed a 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident. This is a commendable measure.

The government’s allocation of Rs 1,100 crore for Start-up and Standup India is inadequate. The start-up industry had two sets of demands: (i) for ease of doing business; (ii) provision of tax incentives.

Parts of both have been announced in the Budget. The demands for reducing TDS on small companies and for ensuring service tax is based on receipts have been partially conceded.

Opening up of new jobs in public transport and an announcement of dates for phasing out exemption are good measures. The external environment was very hostile over the last year. Despite this, the figures for 2016 show that RE was more than BE both for total revenue and expenditure. This is commendable indeed.

For the current year, the fiscal deficit is 3.5% indicating fiscal discipline. This year there is an increase in the allocation for agriculture and farmers, rural development, and infrastructure. Many steps have been taken to improve the ease of doing business and to reduce litigation in tax collection.

The only disappointment has been the lack of any incentive for the middle class (although the Budget provides small increases in rebate and rent limits), as also not allowing larger companies to benefit from the reduction in corporate tax from 30% to 29%.

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