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  1. Startup India: Modi govt’s action plan fails to meet VCs’ expectations

Startup India: Modi govt’s action plan fails to meet VCs’ expectations

Startup India: Prime Minister Narendra Modi’s 19-point action plan on start-ups has failed to meet the expectation of some venture capitalists and new start-ups. Many start-ups may not be able to leverage from the tax holiday for first three years as they barely report profits in the first few years of operations.

By: | Updated: January 22, 2016 1:21 PM
narendra modi

Startup India: Prime Minister Narendra Modi’s 19-point action plan on start-ups has failed to meet the expectation of some venture capitalists and new start-ups. (Express photo)

Startup India: Many start-ups may not be able to leverage from the tax holiday for first three years as they barely report profits in the first few years of operations. On the other hand, incentives for venture capitalists to invest in start-ups in India was also given a miss in the plan.

“In initial three years, generally the start-ups don’t have so much profits and they may not avail the full benefit of the scheme. Instead of the exemption, deduction on lines of Section 35 AD of the Income Tax Act, 1961 can also be considered for the start-ups,” according to Amit Jindal, partner at Felix Advisor.

“If full deduction is available on capital expenditure to start-ups in initial year, then for eight years they can carry forward the business losses and can get set off against the business income which may improve their cash flows,” Jindal added.

Tax exemption from capital gains on investments in start-ups will likely encourage investment as managing cash flow continues to be a challenge for start-ups, according to government. But entrepreneurs see very little benefit in the same.

Peesh Chopra, managing Partner of Peesh Venture Capital says that it’s a positive step by the government but the concerns of venture capitalists in India and outside India have been left unanswered. “There are no announcements that will change or improve the investments from venture capitalists, domestically or foreign. It will not lead them to invest more or more often in start-ups.”

Amit Dube, founder of FoodAbhi said that government needs to ensure that no sector is hyper-capitalised. “It must build confidence in the India story and encourage investments from venture capitalists in start-ups,” he said.

“The government has released a global macro-economic plan but its success will only be determined if it translates in tangible steps,” said Shilpa Sharma, founder at Jaypore.com

Also there is less for older start-ups such as Flipkart, Snapdeal, Zomato, and Foodpanda, which are more than five-years old and not eligible for the tax relief. Prime Minister has also restricted the benefits to start-ups involved in innovation or technology or providing a service which is significantly better than an existing one.

We will have to wait until the Budget to get further clarity on the taxation norms and funding regulations. But we have a seen a mixed bag of emotions on the start-up India initiative so far.

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  1. Hemen Parekh
    Jan 23, 2016 at 6:43 am
    HAVE A DEGREE : WILL SWEEP Some 19,000 graduates / post graduates who have applied for the job of sweepers in Amroha Nagar Palika , seem to be saying just that ! But only 114 of these BA / B Sc / MA / MBA / M Tech grads will get those jobs ! Rest will join the rank of 3.5 million graduates who join our work force each year - to remain jobless Now , I am not saying that the job of sweeping streets is " below the dignity " of anyone Why , even our Netas do it , if there is a TV camera around ! But take a look at the following news ( DNA / 11 Sept 2015 ) : Against 368 vacancies of " Peons " advertized by UP Govt , applications received were as follows : * Total Number of applicants.............. 20 lakh { 5,435 applicants for each post ! } * No of PhDs.................................... 201 * No of Master Degree holders............ 20,056 * No of Bachelor Degree holders.......... 1,23,000 * No of 12th Standard p................. 6,00,000 * No of 10th Standard p................. 8,20,000 { Minimum prescribed Edu Qualification = 10th Standard } This scenario repeats , month after month , year after year ! The only hope for these millions of Graduates / Post Graduates, is to apply for admission to some 15,000 Industrial Training Insutes ( ITIs ) for getting " trained " as Electricians / Plumbers / Carpenters / Masons etc ,in order to acquire " skills " which will enable them to get " Self Emplo " But the problem is : * None of these " re-skilled " jobless will qualify as a " START UP ", under Start Up Action Plan announced on 16 Jan 2016 * To start " Self Employment " , no bank will give them a loan of Rs 1 Million, with ZERO interest for first 10 years , and without requiring any securities For turning 10 million jobless into 10 million " Self Emplo "(@ loan of Rs 10 lakh each ) , would require EACH YEAR , disburt of : Rs 10 LAKH*CRORES ! Government just does not have that kind of money But BLACK MONEY ders have ! All we need to do is to " INCENTIVIZE " them to help start a " NEW ECONOMIC ORDER " , where Self Employment is not merely encouraged but it is CELEBRATED ! It does not require ping of any bill in Rajya Sabha to declare : * No questions asked , as to the source , for any CASH deposited in Jan Dhan Bank A/C , provided that account holder , first registers on Income Tax Department web site as a " Self Emplo " person * All payments made out from such " Self Emplo " accounts , must be by Cheques / Credit - Debit Cards / RuPay Cards / Mobile Wallets / Electronic Transfers etc * Levy of a 2% Bank Transaction Tax ( BTT ) on all such payments * Total abolition of Personal Income Tax for these " Self Emplo " * Self Emplo barred from any loans from banking system * Self Emplo not eligible for any incentive / subsidy from Center / States If it does not sound politically correct to call this initiative an " AMNESTY SCHEME ", then call it , " SELF CAPITAL SCHEME " / " ECONOMY KICK-START SCHEME " When , * The entire World is set to lose 11 million jobs in next 5 years * World Economy is in a downward spiral * International Trade is shrinking * Jobless / Economic migrants are marching onto Europe / Australia * Resentment / Intolerance are mere manifestation of jobless poverty , This is the ONLY WAY , India can make 21st Century , an Indian Century ! I hope Shri Narendra Modiji - and his colleagues in Cabinet - has the political will to introduce this in the forthcoming budget on 29 Feb 2016 ! ------------------------------------------------------------------------------------------------------- hemen parekh 23 Jan 2016 / blogs
    Reply
    1. N
      Narayan
      Jan 22, 2016 at 2:26 am
      Software start ups are high risk and high return propositions. That is why venture capitalists are required. Most start ups will fail, and few will make it filthy rich. Market demand is the biggest risk. Govt need not get into this business. This may start a new chapter in fraudulent practice.
      Reply
      1. S
        Sohan Dhande
        Jan 21, 2016 at 8:15 pm
        Good read... Deduction on Capital Expenditure makes sense. Start-up Investment front certainly needs to improve alongwith desired politically stable environment.
        Reply

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