In the wake of Commerce Minister Nirmala Sitharaman, pitching for long term tax holidays for startups in India where she suggested that they should consider raising tax relaxation period from the 3-year period to 7 years, and thereby give a boost to PM Narendra Modi’s Startup India campaign, some top honchos in the segment reacted in a negative manner.
Samar Singla, CEO and Founder Jugnoo says, “No startup works for getting tax concessions like these. In my opinion such relaxations may work for big companies like Reliance, Tata, but not the startups.”
Startups seek extension in tax holiday period because in rare events a company attains its break even point in three years, sometimes longer. Hence, longer-duration tax concession would not only encourage entrepreneurship in the country but will also enable companies to expand operations, generate employment, according to the government view.
According to Ankita Jain, Co-Founder GoPaisa.com,”the 3 year tax holiday was nothing but “hog wash” as almost no startup makes any money in the first three years, hence three year window probably didn’t provide any tax holiday. But 7-year is indeed encouraging and would definitely send the right signal to entrepreneurs in the sense that the government and hence the country is invested with them, for the venture to succeed. ”
She added, “Startups are certainly important employment providers, and would turn the youth into job providers than seekers. Who would have thought 10 years back that new companies like Flipkart, Paytm, Snapdeal and more such would be employing tens of thousands of Indians across the nation in all sort of jobs”.
Singhla, on the other hand believes that even without tax relaxations entrepreneurship rates can grow in an economy like India’s. “Tax breaks have nothing to do with entrepreneurship. No one becomes entrepreneur to get tax concession. We have economies like US where we see high taxes and high rate of entrepreneurship. So, tax concessions don’t boost entrepreneurship in my opinion” said the Jugnoo founder.