Start-ups in India have been the key in attracting foreign investment into the country. However, everyone is aware about the difficulties that the start-ups face due to red-tapes and other hurdles.
The Indian economy has never been nourishing enough for start-ups. Strict scrutiny, documentation and operational costs along with the taxation have always suffocated the life of these small ventures. The Hon’ble Finance Minister delivered her maiden budget on 5th July 2019. It saw the emergence of an assisting hand for these start-ups!
This is what the Government has to offer to all the budding entrepreneurs in the country:
1) Incubators: To encourage start-ups and inspire young entrepreneurs to come up with their own ideas, 20 new technology incubators will be introduced. These will be specially designed to nurture the budding talent of young business minds.
2) Special TV Program: A state-owned TV program on DD channels has been announced for start-ups. It is supposed to serve as a medium of encouragement and a platform for discussing various ideas, issues, and growth of the firms. It will also touch aspects of funding and the mapping of ventures with capitalists.
3) Extension under Section 54GB: Section 54GB of Income Tax Act offered an exemption on investments made in start-ups by selling of a residential property. The company had to utilize it to acquire new assets. This was applicable only to investments made before 31st March 2019, now it has been extended to 31st March 2021.
4) Scrutiny: Previously the start-ups and investors were subjected to high scrutiny even after filling necessary declarations. Now this check over them has been removed with respect to the valuation of the share premium. The IT department can no longer scrutinize the funds raised by start-ups.
5) Approvals for Inquiry: The AOs need to obtain prior approval from the supervisory officer before conducting an inquiry or verification on the tax returns filed by start-ups. The Minister has proposed relaxed norms for carrying forward and setting-up losses.
6) Exemption under Category II AIFs: Start-ups that are funded by Category II AIFs are exempted from angle tax. No questions will be raised where funding exceeds the face value of the shares. This amendment to section 56(2)(viib) is made effective from 1st April 2019.
These are some special provisions that the Budget 2019-20 has in store for SMEs and Start-ups! We will be more than happy to provide any further assistance! So, don’t hesitate to get in touch!