1. Startup India: Govt hints it may cut long term capital gains tax

Startup India: Govt hints it may cut long term capital gains tax

Government today hinted at lowering the long-term capital gain tax on investments made in unlisted firms, particularly startups, in the Budget for the next financial year...

By: | New Delhi | Published: January 16, 2016 2:17 PM
Speaking at Start Up India conference, Revenue Secretary Hasmukh Adhia said a long-term capital gain tax of 20 per cent is levied on a three-year investment in an unlisted company, but holding of equity shares of a listed firm for one year is exempt from any such levy.  (Courtesy: Twitter)

Speaking at Start Up India conference, Revenue Secretary Hasmukh Adhia said a long-term capital gain tax of 20 per cent is levied on a three-year investment in an unlisted company, but holding of equity shares of a listed firm for one year is exempt from any such levy. (Courtesy: Twitter)

Government today hinted at lowering the long-term capital gain tax on investments made in unlisted firms, particularly startups, in the Budget for the next financial year, to bring them closer to the levels prevalent for the listed companies.

Speaking at Start Up India conference, Revenue Secretary Hasmukh Adhia said a long-term capital gain tax of 20 per cent is levied on a three-year investment in an unlisted company, but holding of equity shares of a listed firm for one year is exempt from any such levy.

“Now this gap is too wide… I can assure you of this gap being bridged at the time of Budget,” he said.

Adhia said some other tax incentives to encourage startup ecosystem, like rationalising Service Tax rules, are also likely to be announced in Budget, to be presented on February 29.

A strong pitch for removing the differential treatment of taxing long-term gains in listed and unlisted companies have been made, he said.

“The point is, if somebody is making hot investment in equity market, if he keeps it for one year, after one year there is zero capital gain. As compared to that people who have been taking the risk of putting long-term equity investment in unlisted security, like in case of a startup, they have to pay 20 per cent even after 3 years,” Adhia said.

Speaking at the same event, Economic Affairs Secretary Shaktikanta Das said the Finance Ministry has held detailed discussion with the Reserve Bank over online filing of returns under FEMA.

“You will see very quick action on that which will facilitate online filing of returns,” Das said.

He said interest rates in India will be comparable to those prevalent in countries like the US and Japan when inflation rate falls to their levels on a consistent basis.

Sebi Member Prashant Saran said the markets regulator has been been “very proactive” to encourage startups. He said startups were welcome to approach the regulator with suggestions adding “none of our regulations are written down on stone.”

On ways to improve regulations for startups, Corporate Affairs Secretary Tapan Ray said efficiency in registration is very important and in the next couple of months it will take only 24 hours to register a company.

“As of now there is some complaint that it takes a long time to register companies, so we are going through an action plan to revise the rules… remove rules which are irrelevant for startups,” Ray said.

He further said, keeping the startups in mind, a committee has been set up to suggest amendments to Company Laws with regards to managerial remuneration, insider trading norms and private placements.

When asked how easy it is for a new age company to come and list in India, Sebi member Saran said stock exchanges have a startup platform, which is called Institutional Trading Platform for which we have done away with detailed object clause which is required in an IPO document.

Economic Affairs Secretary said that the ‘Start Up’ programme is a real game changer and will bring in investment and facilitate huge amount of job creation.

Referring to starting a company in India as a “Chakravyuh”, Das said “it is easier to get in than to get out”. He said the Bankruptcy and Insolvency law will create a vibrant credit market in India and provide an exit option to entrepreneurs.

  1. Hemen Parekh
    Jan 17, 2016 at 3:53 am
    TEN MILLION START- UPS IN ONE YEAR ? Thank you , Narendrabhai , for the Start Up Action Plan announced last evening I am glad that some of my suggestions ( sent to Ministers / Secretaries ) over the past 2 years , have been incorporated in the ACTION PLAN , in respect of : * Self Certification * Simplified Registration thru Mobile App * Tax Exemption for Capital Gains * Entrepreneurship Program for 10 lakh students * No Corporate Income Tax for 3 years You will find my detailed suggestions covering these points in following blogs at , : * A New Economic Order - Start Up Act 2015 / 12 Sept 2015 * From Job Seekers to Job Creators / 15 Sept 2015 * Back Up Factory of the World / 09 Sept 2015 * Blue Print for a Start Up Nation / 27 Dec 2015 * Creating Jobs Vs Creating Self Emplo ? / 10 Dec 2015 * Get Out of the Way / 01 Dec 2015 * Ten Million Entrepreneurs ? / 19 Oct 2015 * Start Up Eco System / USA vs India / 01 Oct 2015 * Treading the Beaten Path / 25 Sept 2015 * Second Industrial Revolution / 21 Sept 2015 * From Single Window to a Single Day ? / 19 Sept 2015 * Myth of Job Creation / 12 Sept 2015 * Killing Many Birds with One Stone / 07 Sept 2015 * If Mohamed cannot go to Mountain / 26 July 2015 * Ditch Historical Baggage / 24 Dec 2015 * Create Self Employment / 21 Feb 2015 Very likely , your initiative may see the birth of ten thousand new start-ups in 2016-17, which , together , might generate one lakh jobs In itself, this will bring a new dynamism to India's Economy But that will still fall far short of 12 Million ( 120 lakh ) youth joining the work-force each year Can all of these youth become Start Ups ? It is entirely possible All you need to do is to implement my following suggestion, described in , " A New Economic Order / Start Up Act - 2015 " / 12 Sept 2015 " : SUGGESTION * Although all Start Ups will need to file annual Income Tax returns ( with full disclosure of income / expenses / profits / sources of funds etc ) , it will not be required to pay any Corporate Income Tax for the first 10 years of its existence * A Start Up will be free to raise funds from any source ( Individuals / Companies / PE funds / VCs / Angel Investors / Religious Trusts etc ) * 100 % FDI will be permitted in Start Ups * A Start Up can receive loans or equity and be able to accept fixed deposits . It can also give loans to individuals or other Start Ups or invest in other Start Ups by way of equity * There will be no restrictions on what interest ( on loans / FDs ) that a Start Up may pay nor any restrictions on dividends it may declare The dividends declared by Start Ups will not attract any Income Tax * As far as the persons / companies etc providing funds to Start Ups ( by way of loans or equity ) is concerned , no questions will be asked re their source of funds WHAT WILL HAPPEN , IF IMPLEMENTED ? * Billions of rupees worth Black Money will flow into these Start Ups - money which is currently lying unutilized or locked up in unproductive ets * Within 3 months , thousands of Venture Capital Funds will be born , exclusively for funding of Start Ups ( You know who will set up these VCs ! ) * With NO Income Tax to be paid , Start Ups will conduct all transactions through cheques ( receipts / payments ) * GST collections will go up * Domestic Savings Rate will go up * Since millions of ( Black Money holding ) individuals / businesses will come forward to fund these Start Ups , lending pressure on banks will go down * Who knows , Start Ups may get into the business of ets Reconstruction and relieve banks of NPAs ! * With locally / domestically stashed Black Money flowing into the economy , our dependence on FDI will go down * Corruption will decline drastically Dear Shri Narendrabhai : It is still not late to incorporate my suggestion in forthcoming Union Budget on 29 Feb 2016 This is your opportunity to * Dream BIG * Enable millions to dream big * Unleash the Entrepreneurial Genome of India's Youth * Make 21st Century , an Indian Century * notwithstanding the opposition in Rajya Sabha ------------------------------------------------------------------------------------------------------- hemen parekh 17 Jan 2016
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