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A Startup-friendly Union Budget

The Union Budget presented in July by Finance Minister Nirmala Sitharaman has offered many reasons to cheer for the startup community. To begin with, the budget provides relief in respect to the arbitrary angel tax that has been stalling startup growth in the country. No income-tax scrutiny would be done with respect to the valuation

The Union Budget presented in July by Finance Minister Nirmala Sitharaman has offered many reasons to cheer for the startup community. To begin with, the budget provides relief in respect to the arbitrary angel tax that has been stalling startup growth in the country.

No income-tax scrutiny would be done with respect to the valuation of shares (angel tax) of startups provided the requisite information is provided along with the income-tax return. Establishing identity of investors and source of funds will be resolved through an e-verification process. Investments from Category II AIFs (private equity funds) are also now completely exempted from angel tax. The e-KYC of foreign investors will make it easier to infuse funds from overseas investors into Indian startups.

Experts close to startups circles in the State believe that the budget proposal to relax angel tax will benefit the startup ecosystem in the State, especially ‘Kerala Startup Fund-of-Funds’ using which Kerala Startup Mission (KSUM) is raising capital for investing in new companies.

Kerala and especially its startup ecosystem had an extra reason to feel happy with FM Sitharaman. In the post budget presser, she referred to Genrobotics, a KSUM-backed venture which is all set to eliminate manual scavenging with their Bandicoot robot. She said the government would provide financial assistance for acquiring robots.

The FM also stated that special administrative arrangements will be made by the Central Board of Direct Taxes (CBDT) for pending assessments of startups and redressal of their grievances. The relaxation of conditions for carry-forwarding and setting off company losses will also boost the ecosystem. Extension of LTCG exemption sunset period to 31 March, 2021 is another major plus.

The budget has envisioned establishing a national research foundation to strengthen R&D initiatives and focus on skill training 10 million youth for global jobs with emphasis on industry-relevant new-age tech domains.

However, NASSCOM feels a lot more could have been addressed. The most important being the extension of SEZ sunset clause which expires on 31 March 2020. The FM has laid out a vision that focusses on infrastructure, startups and MSMEs, Innovation and Research, Education and Skilling and adoption of Digital Payments. These are some of the right ingredients, and a great way to start.

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