Budget 2019: What’s there in Finance Minister kitty for startups - The India Saga



Budget 2019: What’s there in Finance Minister kitty for startups

As Nirmala Sitharaman, Union Finance Minister presents the budget on July 5, 2019, founders of the startup world have a…

Budget 2019: What’s there in Finance Minister kitty for startups

As Nirmala Sitharaman, Union Finance Minister presents the budget on July 5, 2019, founders of the startup world have a huge expectation from Modi 2.0 government. They expect the government to make India a preferred hub especially for startups as the government promised to establish around 50,000 new startups by 2024. Not only this, entrepreneurs want government to bring better policies them to strengthen their business. So as the budget is out, a sigh of relief has been seen on the faces of entrepreneurs. This is what the Minister highlighted during the budget proposal: 

An exclusive television programme for and by startups

The Minister  proposed to start a television programme within the DD bouquet of channels exclusively for startups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning. This channel will be designed and executed by startups themselves. 

Solving ÂAngel TaxÂ

The startups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. This has been proposed in the Union Budget 2019-20 presented by the Union Minister of Finance and Corporate Affairs, Nirmala Sitharaman in the Parliament with a view to resolve the so-called ÂAngel Tax issue. 

Mechanism of e-verification

In her budget speech, the Finance Minister further highlighted that the issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by star-ups will not require any kind of scrutiny from the Income Tax Department. 

In addition, Special Administrative arrangements shall be made by the Central Board of Direct Taxes (CBDT) for pending assessments of startups and redressal of their grievances. 

ÂIt will be ensured that no inquiry or verification in such cases can be carried out by the Assessing Officer without obtaining approval of his supervisory officerÂ, she added. 

Extension of benefit

At present, startups are not required to justify fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). The Finance Minister proposed to extend this benefit to Category-II Alternative Investment Funds also. By doing this, valuation of shares issued to these funds will be beyond the scope of income tax scrutiny. 

The Finance Minister further proposed to relax some of the conditions for carry forward and set off of losses in the case of startups. She also proposed to extend the period of exemption of capital gains arising from sale of residential house for investment in startups up to March 2021 and relax certain conditions of this exemption. 

Boost economic growth and Make in India

Mega Investment in Sunrise and Advanced Technology Areas in order to boost economic growth and Make in India. The Government will launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as Semi-conductor Fabrication (FAB), Solar PhotoVoltaic cells, Lithium storage batteries, Solar electric charging infrastructure, Computer Servers, Laptops, etc. and provide them investment linked income tax exemptions under section 35 AD of the Income Tax Act, and other indirect tax benefits.

Stand-Up India Scheme to be continued for the period of 2020-25. 

The vision for the next decade laid down in the Budget document focuses upon building physical and social infrastructure; Make in India with particular emphasis on MSMEs, Startups, defence manufacturing, automobiles, electronics, fabs and batteries, and medical devices, among others, emphasize on employment generation and growth. 

The startup ecosystem wanted government to provide simpler regulations surrounding the tax charges (corporate taxes, and stable economic policies) and I guess this budget justified it.