Union Budget 2021 Expectations for Digital Sector: With the Union Budget 2021 around the corner, tech industry has a broad set of expectations— revival of small businesses, digital inclusivity and clarity on taxation rules in the new normal
By Srinath Srinivasan
Union Budget 2021-22 Expectations for Digital sector: The upcoming UNION budget 2021 is expected to add value to the economic relief announced following the pandemic by means of tax reliefs, incentives and new policies. In a pre-Budget memorandum submitted to the government, Nasscom has highlighted some key points relating to the new way of working or the new normal. When it comes to startups, the IT industry forum has suggested levy of tax on ESOP only at the time of sale of shares, 10% tax on long term capital gain on sale of shares by resident investors (at par with non-resident investors) and to exempt all DPIIT recognised startups from Minimum Alternate Tax, among a few other suggestions.
In terms of the recent operational changes which includes work from home, Nasscom has appealed to the government to keep a threshold of Rs 50000 per employee as revenue expenditure for facilitating work-from-home (WFH) and the same need not be taxed as capital asset or perquisite, in the hands of employees. Further, Nasscom has suggested a provision of tax deductible WFH allowance, similar to transport allowance, to cover expenditure incurred by employees on purchase of necessary infrastructure/ accessories. Due to the pandemic, there are instances of businesses which are set to close down or be sold by their promoters. According to the memorandum,the government should introduce measures that would incentivise organisations to buy out such loss-making companies and hence, save jobs and permanent closures.
This Budget is expected to make more provisions for maximising data centre infrastructure. “India’s data centre capacity remains abysmally low, needing a huge infrastructural boost. There should be a separate, favourable tax policy for homegrown cloud service providers (CSPs) to promote ‘Make in India Cloud’,” says Sunil Gupta, CEO and co-founder at Yotta Infrastructure. He also insists that the government should provide fiscal incentives on certain performance parameters linked to adoption of standards and highest performance, including lowest power usage effectiveness, scalability, and adoption of green energy. Nasscom has also suggested incentivising data centre infrastructure.
With growth in cloud computing, the need for high performance computing has also gone up in education, Covid vaccine discovery and many other sectors. “Schemes to fund and facilitate affordable access to high-performance computing resources for startups will rapidly accelerate India’s ability to scale innovations across agriculture, energy, electronics manufacturing, and pharmaceuticals. Additionally, tax incentives that reward substantial datacentre investments will spark a virtuous cycle across India’s IT demand and supply,” says Arvind Chandrasekar, director, Regulatory Affairs and Government Relations, AMD India.
“It would be great to see the government incentivising R&D with a keen focus on the deep-tech domain,” says Supria Dhanda, vice-president and country manager of Western Digital India. With respect to intellectual properties (IP), Nasscom has suggested a detailed IP regime in its memorandum. AI, ML and Blockchain are some key technologies that may get attention in this Budget. Specifically, practice regulations and GST on cryptotrading are expected, given the recent surge in the volume of trades and the government’s existing interest in bringing cryptotrading into the tax ambit.
“The government should support kirana stores in their digitalisation attempts,” says Prem Kumar, founder and CEO, Snapbizz, talking about what e-commerce and retail tech industry expects from the Budget. Harshil Mathur, CEO and co-founder, Razorpay, says he hopes that the government will think of alternatives to the Zero Merchant Discount Rate policy, as that will help promote e-payments and drive significant digital adoption amongst businesses.
When it comes to mobility and logistics sector, startups are expecting some important government intervention. “We would like batteries to cost less and lower import costs of other EV components such as motors and drives,” says Satya Chakravarthy, co-founder, and CTO, The ePlane Company.
“It will be welcoming news if the government introduces new strategies and relaxations that will drive faster movement of Covid-19 vaccines across the country,” says Kushal Nahata, CEO & co-founder, FarEye. “Digitalising core vaccine transportation operations will save millions in transportation costs and build faster single-window clearance processes,” he adds.