A year ago in January 2016, PM Modi started the Startup India campaign in order to support the start-up entrepreneurs in their attempt to set up new businesses. The goal was to encourage entrepreneurship in all sections of the society and to create more jobs for a number of people.
Make in India can only be possible if the government gives certain relaxation for start-ups. In this new Budget, the government may announce a number of policies and initiatives to support the start-up industries.
The upcoming Union Budget is going to be a crucial one for the whole country and the government needs to take special steps so as to meet GDP growth expectations and demonstrate the fact that the demonetization scheme was certainly a major step to eradicate corruption out of the country. Planned public expenditure should be increased as well, since that can encourage world class business firms to set up their operations in India.
“The Budget 2017 that is to be announced in the coming month is expected by many to be a significant one for the startup firms operating in different parts of the country. This is particularly important in light of the recent economic changes that have been brought about by the implementation of demonetization,” says Shubham Patil, CEO and Founder, BusinessWindo.com.
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Expectation for SME industry
Start-ups are expecting the current budget program to support the needs of the middle and lower class business community since they are the ones that are most affected by the demonetization move. There is a need to lower the rates of corporate tax and personal income tax. Incentives applied on direct taxes can make things financially easier for this group.
“ There should be a number of profitable tax concessions on unlisted securities, convertible instruments and employee stock options. Special importance should also be given to building of better infrastructure in different parts of India. The corporate tax rate for startup companies promoting the digital payments ecosystem should be reduced from the earlier 35% to the new rate of 25%,” says Patil.
Digital transaction reforms
Start-ups are expecting that the new budget should take special measures to upgrade the digital infrastructure in all parts of the country. “There should be incentives for all digital payments which can benefit the country’s ecommerce industry on an overall basis,” says Patil
The government needs to take special measures so as to encourage people in India to perform more transactions through online and digital mediums. It is very necessary to promote digital literacy in rural areas.
“More emphasis should be given on rural areas where high-speed internet network should connect all the cities, villages and towns altogether with uniformity in speed,” says Patil.
Adding to it, “the government also needs to push tax cuts in digital transactions to keep in sync with their decision on demonetization or cashless transaction as it will be very beneficial for the industry in the long run,” says Amit Daga, MD, Deal Kya Hai.
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It becomes very difficult for start-ups to go through the various tax implications at the initial stage of building a company. But if the government gives support in this quick tax regime, it can pace up the growth of SME’s.
“This may include faster procedural clearances and widening of tax-free regime from 3 years to 5 years. Various online payment options such as UPI, net-banking, debit and credit cards are likely to get tax exemptions as well,” says Patil
Introduction of GST may give a lot of relief to SME businesses as tax implications will reduce to a level. “The lending rates need to go down along with implementation of GST which will help the industry in the long run. There is a need of tax holiday of at least 5 years for all SMEs. The credit rating system also needs to be relaxed for start-ups so that they can raise funds from banks,” says Daga.