Union Budget 2020: The government’s move to increase the turnover threshold for eligible start-ups to Rs 100 crore from Rs 25 crore for availing a 100% tax deduction on profits, for three consecutive assessment years, comes as a breather for the sector. Further, from 2020-21, start-ups can claim this deduction over a period of ten years, up from the current seven years. The deduction can be claimed in three consecutive years.

This extension is useful since start-ups typically take a longer time to turn profitable and the additional window of three years is helpful, Vikas Vasal, partner at Grant Thornton, said.

Vasal said the emphasis on the Rs 100 crore of turnover comes as a big relief for the sector. Hiten Kotak, partner at PwC, observed the tax break would improve the cash flows.

Start-ups are facing rough weather as they attempt to build sustainable business models, compelling them to downsize their workforce. Finance minister Nirmala Sitharaman also proposed to ease the burden of taxation on employees by deferring the tax payment on ESOP (Employee Stock Option Plan) by five years or till they leave the company or when they sell their shares, whichever is earliest.

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Start-ups generally use ESOPs to retain talented employees. “Tax reforms on ESOPs and increase in turnover limit for start-ups from Rs 25 crore to Rs 100 crore will boost the start-up system,” said Nakul Kumar, co-founder and COO at Cashify.

Bhavin Turakhia, founder & CEO at Flock said the allocation of Rs 3,000 crore towards skill development will help create a future-ready workforce. “The government’s move to boost emerging technologies such as internet of things (IoT), machine learning (ML), artificial intelligence (AI) and analytics will provide a filip to the country’s digital economy,” Turakhia said.

However, the government is yet to address some of the key asks of the start-ups such as allowing listing of start-ups in other countries which will give them access to greater capital and providing further impetus to fintech ecosystem, said Ankur Pahwa, partner at EY.

Total losses for a clutch of start-ups –Grofers, Paytm, Oyo, Delhivery, Swiggy and Zomato—rose to Rs 11,489.48 crore in FY19 compared to losses of Rs 3,257.04 in FY18, an increase of 252.75%. Following the WeWork debacle, global investors like SoftBank that backs a handful of Indian start-ups are treading cautiously.Rajeev Misra, CEO of SoftBank Vision Fund said recently the firm will recalibrate its strategy to focus on mid-stage growth companies which have positive top line.