The countdown for Budget 2016 has begun and this time it’s more about the self sung song of ‘Startup India Standup India’. Not forgetting what people had expected then and what they expect now, is to pay less taxes and get better public services.
The budget is important this year due to the slow environment in the investment sector, there needs to be a significant reform in the public investment since the private sector seems to have taken a pause. In the last budget, Finance Minister Arun Jaitley had clearly stated to kill the tax preferences for the corporate sector and reduce the tax upto 25%, it will be interesting to watch this year’s budget as the reforms hit the document.
Some significant announcements at the Startup India event included:
- Startups being exempted from paying income tax for the first three years.
- 80% rebate on filing a patent application
- Exemption of tax on capital gain
Here’s what the startups expect of this budget:
Startups be exempted from direct (announced in startup Action plan, but has limited impact) and indirect taxes including MAT, a move that would reduce compliance burden and reduce cash outflows. There is an urgent need to remove angel tax that serves to tax the capital receipts, when the availability of financing from recognized sources such as Banks and Venture Capital, funds is unavailable and angel funds is the only available source. NASSCOM has also shared recommendations to enable investments in startups. Investments in early stage startups are high risk and there is a need to rationalise tax rates for investors. Harmonise capital gains tax for resident investors with non-resident investors and tax rates for angel investors. Allow proprietary domestic capital to set up an LLP as an investment vehicle, exemption of capital gains tax on income from sale of equity of a startup if the proceeds are reinvested in securities of new startups (Announced in startup India action plan). – Rajat Tandon, Vice President, NASSCOM 10,000 Startups
“We hope this budget would end one anomaly – treating unfavourably investments by AIFs and Angel Groups in unlisted companies. Currently investors of such companies pay a much higher tax on capital gains while taking a far higher risk as compared to publicly traded shares. We do expect that capital gains tax for AIF funds and angel group investors will be aligned to the current tax regime for investments made in listed shares.”- Padmaja Ruparel, President, Indian Angel Network
“With the Union Budget round the corner, startups in India are holding the highest stakes following the Prime Minister’s initiatives around ease of doing business and building a startup friendly ecosystem. Faster setting up of enterprises, correction to duty structures and streamlining of procurement processes are some of the areas where the industry expects key announcements. The Industry is expecting a quick implementation of GST, streamlining processes for speedier implementation of large infrastructure projects. Development of infrastructure is a prerequisite for growth. Similar to road and rail, creation of Digital Highways is elementary providing high bandwidth network of Internet across India. We’d like to see avenues of PPP in the coming union budget which will give shape to Digital India.
Various skill development initiatives getting into mainstream operational mode is also on the wish-list. In this direction, Investments in terms of technology and infrastructure should be given more weightage when formulating schemes. The MSME industry is set to tap the potential of ‘Make in India’ initiative. This industry has potential to employee over 60 million people and will be a growth driver for the economy. Providing a special package for the MSME sector will help sustainable growth. ” – Dinesh Agarwal, Founder and CEO, IndiaMart
The roll out of excellent initiatives like Startup India and Digital India by the Indian government is a step in the right direction as it strives to create a promising environment for budding entrepreneurs. We are hopeful that such campaigns will convert to strong economic growth and increase in overall consumption. We hope that the government will continue giving thrust to various reforms in this sector in the forthcoming Union Budget 2016-17.
As a leading e-commerce brand, with a proud association with millions of SMEs across India, we hope the government will present a futuristic tax policy that will address the complications of the current tax structure. We hope that the GST roadmap will be shared in the budget for FY 2016-17.
Finally we look forward to an ecosystem devoid of red-tapism, paving the way for greater ease in doing business and creating the ground for Innovation & Entrepreneurship.”- Kiran Murthi, CEO, AskmeBazaar.com
We need only two things: one, more bandwidth/spectrum; and two, a level playing field on taxes. Why should a rich, old, viable, lucrative medium like print advertising be exempt from service tax, while the fledgling, entrepreneurial, technology driven Internet advertising is skimmed? – Raghav Bahl, Founder, The Quint
“While I welcome our Prime Minister’s startup India policy which brings in a lot of tax breaks for us, a large 15B fund, exemptions from capital gains tax, faster and cheaper patent applications among many others; as a key player in the ecommerce and hyperlocal industry. I have some of my own expectations also from the upcoming budget like E Commerce for instance is a powerful instrument those allow consumers to transact online, offering traceability and transparency. However trends where some states are now considering taxing each transaction; could be disturbing and will become a huge barrier in adoption of technology. Implementation of nationwide GST will also help in simplifying the entire tax structure, will cut business costs and will ensure more revenue for us. We are looking for simpler processes, easy regulations, faster clearances and less of red-tapism. I expect more liberal labor laws and capital flows will enable business to be more adaptable and agile” – Navneet Singh, Co-founder PepperTap
“I hope that the budget continues on the path of fiscal consolidation. India is standing out as a beacon of growth and stability in an otherwise troubled global outlook. We expect the budget to invest significantly in strengthening the digital infrastructure of the country. It is crucial that we develop a high bandwidth. We would also like to see tax breaks on budget smartphones which support vernacular languages. Tier 2 and 3 cities and rural India thrive on smartphones, and have contributed significantly to productivity.The more the smartphone penetration, the higher will be the levels of entrepreneurship that we will see. We do hope that the KYC requirements will be simplified, and eKYC will be the way forward in the future. We have moved up from a ranking of 134 to 130 among countries in ease of doing business. I hope the Govt will overall introduce measures that take us among the top 100 in the medium term. Starting a business, getting electricity, paying taxes, enforcing contracts, access to credit- we hope that some of these elements will be looked at during the budget.” – Shankar Nath, Sr. Vice President, Paytm
India is on a high growth path and with the tourism friendly policies of the new government, we hope to see more and more developments. I strongly think that the government should focus more on infrastructure and develop airports and provide better connectivity to smaller towns leading to even faster growth in the travel sector. As against to over 4300 operating railway stations, India has only about 130 operating airports — in comparison to 200+ airports of China, which is spending Rs.78,000 crores this year on civil aviation infrastructure. In order to improve facilities available to tourists, the government should also come up with SOPs for infrastructure investments in travel, tourism and hospitality sectors.
The current government’s focus in the Indian startup ecosystem is very positive and the union budget 2016 must encourage investment in the Indian startup space. We also need a better definition for online aggregators and their taxation norms in every vertical as India houses over 1000 online aggregators across various verticals. The government had initiated the idea of defining online marketplace recently but not much progress has been seen here till now.” – Aloke Bajpai, CEO & Co-Founder, ixigo
“With Startup India, the Government has set the expectation high for the startup community. The announcements made then are worth the appreciation, but there are certain measures need to be revisited and some to be introduced to help entrepreneurial ventures grow and get successful. The government should increase the tax holiday period from three years to at least five years as hardly any startup becomes profitable in three of inception to actually pay tax. Also, profitable startups be charged less corporate tax, for instance 20% against the normal 30%, as they are solving some real issues facing the country. This would leave them with more cash in hand to reinvest in their businesses. Further, the benefit of tax rebate on healthcare expense should be allowed to encompass the entire tax payer class and not be restricted to salaried class. This very rebate should be increased to Rs 5000 a month, which is presently bracketed to Rs 1250, and this should be allowed on online healthcare services as well. This would make more people spend on healthcare, give an impetus to the health-tech startup sector and result in more revenue generation for the Government. These are some steps government must mull at in its budgetary exercise” – Saurabh Arora, Founder & CEO, Lybrate
“The primary expectation is some amount of deregulation and allowance of FDI in fintech businesses, or else incentivise domestic capital in invest in this sector. This is imperative for us to push our boundaries on the tech innovations that we are capable of. The budget should also consider relaxation in current tax structures which can make private secondary transactions more liquid from a tax or complication perspective. ” – Varun Dua, CEO, Coverfox