Budget 2016: What it has to offer to startups?

 

This year’s budget had high expectations from the startup sector and our Finance Minister, Mr. Arun Jaitley did not disappoint. However, some industry experts still feel that the announcements lacked the impetus to make an overwhelming impact in the startup space. Here are the highlights of the budget for startups:No tax on income from Startups. For the first three years, startups will be entitled to 100% deduction on profit. However, MAR will apply.

  1. Registering a startup will no longer be tedious. The government has announced a 1-day incorporation policy.
  2. The government will now pay the EPF contribution of 8.33% for all employees working in startups for the first three years. This will help secure the employees future and want more people to take up startup jobs.
  3. Make in India Policy – 100 per cent deduction of profits for startups adhering to certain conditions. This is best suited for manufacturing startups, for which there will be no corporate taxation on net profit.
  4. Make in India Policy – 100 per cent deduction of profits for startups adhering to certain conditions. This is best suited for manufacturing startups, for which there will be no corporate taxation on net profit.
  5. Rs 500 crore has been allocated for SC/ST and women entrepreneurs under the Startup India scheme. A hub will also be created for them.
  6. The government has also announced exceptions on capital gains, in case investments have been made through the government’s startup funds.
  7. Companies who have a turnover of less than five crores have tax benefits now. They will have to pay a lower corporate tax of 29%.
  8. New manufacturing firms incorporated from March 1, 2016, shall be taxed at 25 percent (plus cess and surcharge). No other exemptions shall be available for new companies if taxed at 25 per cent. The charge earlier was 30% and has been reduced to 25% now.
  9. The Pradhan Mantri Mudra Yojna was launched to benefit entrepreneurs who are struggling to rise up.
  10. The Motor Vehicle Act to be amended, which will promote entrepreneurship in the road transport sector.
  11. With the introduction of Krishi Kalyan Cess (KKC) at 0.5 per cent on the value of taxable service, the service tax will go up to 15% starting this June. However, there is some good news in this department.Service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship are proposed to be exempted.
  12. The finance Minister also announced some relief for those living in rented houses. The 80GG deduction was increased from Rs 24,000 to Rs 60,000. This especially helps entrepreneurs just starting out as most of them live in rented houses.
  13. One of the most unexpected moves, the FM announced FDI in food retailing. This is just an announcement though and it is up to the Directorate of Industrial Policy and Promotion (DIPP) to release a policy on this.

Apart from this earlier this year, the PM Narendra Modi had announced a startup India action plan. To ensure only deserving companies reap the benefits of it, the FM defined what a start-up is: “A company which would have equity funding of at least 20% by incubation, angel or private equity fund, an accelerator or angel network registered with SEBI endorsing the innovative nature of the business.”