By Nilyanka Bhushan
Union Budget 2019: The Modi 2.0 government aims to empower startups to grow through innovation and design. Its objective is to create a New India in which startups are encouraged to go global by helping to increase their turnover from Rs 25 crore to 100 crore. The “Startup India” action plan has a 19-point agenda, which envisages multiple incubation centers, easier patent filing, tax exemptions, ease of doing business and a Rs 10,000 crore corpus fund for investing in startups.
Industry opinion is that the startups are cautiously optimistic, since the startup ecosystem has survived through various challenges. The changes to the Angel Tax have finally provided a breather for startups.
Angel Tax on startups needs further clarity
The commerce ministry has cleared a proposal to simplify exemptions for startups under Section 56 (2) (viib) of the Income Tax Act. It is an inspirational move for Angel Investing and the foundation of Startup 2.0 and will unleash the next wave of entrepreneurship to transform India’s economy and generate millions of jobs. Industry should give a big thanks to the PM’s vision and to DIPP along with CBDT for finding an innovative solution to the Angel Tax. While the government had issued a directive that Angel Tax would not be applicable to startups, a latest clarification has stated that it would not be applicable on retrospective cases as well. The budget 2019-20 will set a clear path in terms of regulations that can incentivize the Angel Tax ecosystem. This would also help in greater inflow of domestic capital into startups.
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Startups need a smipler GST
The introduction of GST has helped in simplification of the taxation system, but the delay in tax refunds has hurt startups. A workable solution within the guidelines and definition for startups is much desired. Ideally GST should become payable for startups and SMEs at the point of payment, and not on invoice generation.
More support to Fintech startups needed
The Fintech sector has been the biggest driver for the Indian startup ecosystem. Its growth prospects have been impacted by an ongoing liquidity crisis and constant changes in regulations. India’s online economy has made significant strides, shifting from a largely ‘cash-on-delivery’ model to now clocking a massive number of online digital transactions. In this budget, there should be an increased focus on better SOP’s to build an infrastructure that can continue to empower individuals digitally, which will further boost our economy.
(Author is Managing Partner and Co-founder of Sigma Ventures)
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