The 4,700-odd start-ups in the country can now look forward to the benefit of certain tax sops with the Centre extending the profit-linked deduction for start-ups to three out of seven years from the earlier norm of three out of five years. Further, there has been relaxation in the norms on income tax exemptions for the carry forward of losses, provided the holding of the original promoters remains.
There are also few indirect benefits for the start-ups which include the extension of the minimum alternate tax (MAT) credit to 15 years from the current level of 10 years and the lowering of income tax to 25% from 30% on those companies which have turnover below R50 crore.
Indian Angel Network co-founder Saurabh Srivastava felt the start-ups got certain benefits from the Union Budget and not as much desired.
“We were hoping for MAT to go away but its extension up to 15 years is still satisfactory. Ability to carry forward losses if the founder remains involved is a very positive step as is the tax reduction for companies below R25 crore,” Srivastava said.
However, the two key pain points for the start-ups have been the imposition of angel tax and disparity in long-term capital gains from the sale of unlisted shares. Angel tax is imposed on any venture capitalist or investor for their investments made into any start-up, and though the government brought in certain modifications, they were not satisfactory for the sector.
DVS Advisors managing partner Divakar Vijayasarathy said that extension for claiming 100% tax deduction on profits earned by start-ups extended to three consecutive years out of the first seven years gives a longer gestation period to claim tax deductions by these firms.
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V Balakrishnan, former Infosys Board member and part of Exfinity Ventures, felt that most of the changes in the Budget were incremental in nature and it is very unlikely to change the status quo of the start-ups in the country.