The Start-up industry of India had attached too many hopes to the Union Budget of this year as year 2106 saw a slump in the investments as compared to 2015. The budget, presented by Arun Jaitely, had a mixed bag of announcements for the budding industry.
Finance Minister, in his speech, proposed to provide a 3-year tax holiday period for start-ups in the first seven years of their existence applying to those start-ups that are incorporated after 31st March, 2016. Earlier, the deduction was available for three years in first five years.
Making the announcement, he said, ‘The profit linked deduction available to the star-ups for three years out of five years is being changed to three years out of seven years.’
In addition to this, the condition of continuous holding of 51% of voting rights has been relaxed. However, this is subject to the condition that the holding of the original promoter continues. This came as a huge relief to start-ups as they do not make profits in the first few years of operations.
The proposal of Finance Minister to reduce the income tax for smaller companies with annual turnover of up to Rs 50 crore to 25% is likely to encourage and benefit the start-up industry.
MAT still a concern
The start-up industry has welcomed the majority of the proposals but Minimum Alternate Tax still remains a concern for them. The industry was expecting the exemption from MAT.
Mentioning the MAT in his speech, Jaitely said, ‘It is not practical to remove or reduce MAT at present.’
‘Credit in future years, I propose to allow carry forward of MAT up to a period of 15 years instead of 10 years at present’, he added.
The industry has termed the provision to allow MAT credits to be carried forward from 10 year to 15 year as a positive step forward.
Pranay Bhatia, Partner, Direct Tax, BDO, said that, ‘Increase in MAT credit entitlement to 15 years will also incentivize credit availability to start-ups.’
Union Budget ‘a digital economy budget’: Paytm CEO
Paytm founder and CEO termed the Union Budget 2017 as ‘a digital economy budget’.
Hailing the budget, he said, ‘Incentives for labour intensive sectors including housing, farming and dairy will help SMEs to create new jobs. Focus and attention to bank NPAs as well as increasing bank capitalization is great step towards strengthening the financial system of the country.’
Talking about the income related tax, he said, ‘It will encourage more people to report their incomes and create a larger tax net for the country.’
On the contrary, Sanjay Sethi, CEO and co-founder of ShopClues, called the budget ‘short of expectations’. He appreciated Government’s move towards digital India and the efforts for financial inclusion but he is of the view that proposal somewhere missed the point.
He said, ‘The Government has deployed lot more sticks rather than carrots to push the less-cash agenda.’