Budget 2020: FM Sitharaman proposes seed funding for startups; defers taxation on ESOPs

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Updated: February 1, 2020 2:29:51 PM

Budget 2020 India: FM Sitharaman proposed deferring of tax payment by employees on ESOPs from startups by five years or till exit, whichever is earlier.

Budget 2020, Union Budget 2020 India, Budget 2020 India, Budget 2020-21Budget 2020-21: Finance Minister Nirmala Sitharaman on Saturday doled out capital support for early-stage startups.

Union Budget 2020 India: Finance Minister Nirmala Sitharaman on Saturday doled out capital support for early-stage startups. Presenting her second budget, the minister proposed seed funding support for ‘ideation and development’ of early-stage startups. The government currently has the Rs 10,000-crore Fund of Funds (FFS) scheme in place set up in SIDBI to be deployed over the 14th and 15th Finance Commission cycles. The fund had invested Rs 2,669.83 crore in 279 startups, according to the data shared by the Commerce minister Piyush Goyal in the Lok Sabha in December last year. The proposed funding support, the details for which weren’t announced by the minister, if it takes off will provide necessary initial capital support which currently comes from family and friends, angel investors and early-stage venture funds.

FM Sitharaman also proposed deferring of tax payment by employees on ESOPs from startups by five years or till exit, whichever is earlier. “Startup ESOPs taxation on vesting will be deferred for five years or till exit – whichever is earlier! This is great news as the current system collects taxes too early. This will encourage more startups to get incorporated and create jobs. It will make it easier for startups to incentivize good talent and attract more skilled talent towards working in startups,” said Harsh Jain, Co-founder and COO, Groww.

With respect to MSMEs, Sitharaman said the government has asked the Reserve Bank of India to extend the debt restructuring window for MSMEs by one more year to March 2021. The minister said a scheme for giving subordinate debt for MSMEs will be launched, says FM. The minister further gave respite to MSMEs from the need to get their accounts audited. MSMEs having turnover up to Rs 5 crore will not require auditing of their accounts. This limit has been increased from the current Rs 1 crore limit.

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