Budget 2020 makes it easy for startups to do business

Published: February 3, 2020 1:25:44 AM

Budget 2020 India: Startups in India have mostly been kept outside the benefit of having the government or related entities as their customers or partners.

Budget 2020 India, Budget 2020-21Budget 2020-21: One major move has been the resolution of the issue of taxation on employee stock ownership plans (ESOP) vesting to shares held by employees.

By K Ganesh

Budget 2020 India: Amidst many expectations, the finance minister finally revealed a Budget that has the interests of startups in mind. On the one hand, there were several encouraging allocations and policies around the startup ecosystem and healthcare; on the other hand,there were elements left unaddressed. The government has focused on enabling ease of doing business– be it through the seed-fund to support early-stage startups or the advisory cell on investment. A portal for end-to-end management for faster clearances for businesses is a welcome step. Startups in India have mostly been kept outside the benefit of having the government or related entities as their customers or partners. It is therefore positive to see initiatives that will address this area. This includes new technologies for direct benefit transfer, allocation for quantum computing and related technologies, as well as the use of AI/ML/data in healthcare, among other things.

One major move has been the resolution of the issue of taxation on employee stock ownership plans (ESOP) vesting to shares held by employees. The tax payment now has been deferred by five years, or until employees leave the company, or when they sell their shares – whichever is earlier. This needs to be amended to ensure that the tax deferral is applicable till the sale of the shares as opposed to the end of employment. This is because in most cases the issue arises when the employee leaves as it has to buy the vested options and needs to pay tax but there is no liquidity or cashflow since the shares are not saleable. There has also been an increase in the limit on taxation on profits for startups to those with a turnover of Rs 100 crore.

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Although the allocation for skill development is welcome, there is a need to use this to bridge the skillgap in India as against just focusing on sending them abroad. Currently there is a huge gap between what is taught as part of our education system and what is needed in the industry – which often leads to disappointments and unemployment.I was hoping for the allocation to be more than the proposed Rs 3,000 crore. Apart from this, the focus on ensuring digital infrastructure at gram panchayats through Bharatnet allocation will ensure inclusion and reach of various initiatives to the local level.

The government has acknowledged and will take suitable initiatives towards ensuring a private public partnership in healthcare. It has also expressed willingness for viability gap funding instead of keeping it at policy statements. This is best way to address the challenges in access to healthcare at present. Despite this, there have been some disappointments as well. We hoped to see a lot more being done towards encouraging investments in job creating sectors including tax incentives and exemptions for angel investments. We were looking forward to parity on listed and unlisted securities tax exemptions.

The writer is serial entrepreneur and co-founder of GrowthStory.in

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