Startups game for tax sops, expect incentives

Finance Minister Arun Jaitley in this year’s Union Budget has ratified some of the ‘Start-up India Stand up India’ announcements. 

And, within the startup community, entrepreneurs and investors included, the mood remains rather perfunctory.

Jaitley has proposed to “assist the propagation of startups through 100% deduction of profits for 3 out of 5 years for startups set up during April 2016 to March 2019. 

MAT will apply in such cases. Capital gains will not be taxed if invested in regulated/notified Fund of Funds and by individuals in notified startups, in which they hold majority shares.”

Sanjay Swamy, Managing Partner at Prime Venture Partners, said, “At first glance, fundamentally, there is nothing new. I am not particularly excited.” 

Naganand Doraswamy, president, The Indus Entrepreneurs, said, “The announcements only assert that the startup movement in India still holds water.”

Despite expectations of some direct announcements, the industry agrees, if 2015 was the year of planning, then this year will be the year of action for the startup movement in India. “The ease of registration process and the hope to complete the task in one day is a welcome measure. It will help them focus on building disruptive products and services,” said Shashank N D, Founder & CEO, Practo.

Fund for SC/ST 
In a fresh move, Jaitley has announced the setting up of a Rs 500-crore fund to promote SC/ST entrepreneurs. 

The scheme will facilitate at least two projects per bank branch, one for each category of entrepreneur, and will benefit at least 2.5 lakh entrepreneurs, Jaitley proposed.

He has also proposed the setting up of a  National Scheduled Caste and Scheduled Tribe Hub in the MSME Ministry, in partnership with industry associations. 

This Hub will provide professional support to SC/ST entrepreneurs to fulfil the obligations under the Central Government procurement policy 2012, adopt global best practices and leverage the Stand Up India initiative.

Swamy said, the Budget, once again, has not delivered on the digital payments ecosystem front. 
However, “The devil is in the details. While setting up of the fund in itself is a novel idea, the key lies in its implementation and operationalisation,” said Doraswamy. 

Owing to the lack of clarity on the operationalisation of the fund, “Follow up funding, go-to-market strategies, and other necessary support and infrastructure for such startups remain hidden” he said.

“The industry, on the whole, was expecting some direct announcement in the space, and there no concrete step has been taken,” he said, however, “These are not necessarily Budget items, and the great thing is that it is still a step forward and isn’t regressive,” he conceded. 

Amit Lakhotia, who just moved out of his position as VP — Business at Paytm said, “While the Budget appears to be balanced, some sort of incentive for digital payments should have made the cut.”