Keen to create the best ecosystem for start-ups, the government is likely to come up with more incentives for budding entrepreneurs in the upcoming Budget on the lines of Singapore.
The Commerce and Industry Ministry has suggested several measures to the Finance Ministry in this regard, including easy conditions for availing of capital gains tax exemption and a further reduction in income tax on royalty for technical services.
“DIPP wants to create the best ecosystem for start-ups in the country so that they should not move to Singapore. It has studied several start-up ecosystems of countries, including Israel, the US, the UK, Taiwan, Australia and Germany, but the best one is in Singapore. So, we want to give that type of environment and support to our start-ups,” an official said.
In the recently announced action plan for start-ups, the government has announced exemption of capital gains tax. But the exemption comes with a rider that such entities would have to invest capital gains in the Fund of Funds recognised by the government.
Similarly, there are issues concerning benefits in investments in listed and unlisted start-ups, the official said.
“So, we need to ease these conditions in order to promote more and more investments in start-ups,” the official said, adding that all these moves are aimed at promoting entrepreneurship in the country.
Experts said India should follow the Singapore model to promote young entrepreneurs and limit movement of start-ups from India to the South-East Asian country.
“Start-ups in Singapore find good infrastructure, tax transparency, no bureaucratic hurdles, clear and defined rules and regulations and listing in international markets from Singapore is much easier than from India,” said Krishan Malhotra of corporate law firm Shardul Amarchand and Mangaldas.
Prime Minister Narendra Modi on January 16 unveiled a slew of incentives to boost start-up businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and Rs 10,000 crore corpus to fund them.
The government had also announced a self-certification scheme in respect of nine labour and environment laws and said there will be no inspection during the first three years of launch of the venture.
In the last year’s Budget, the government had reduced the rate of income tax on royalty and fees for technical services from 25 per cent to 10 per cent.