home Startups Modi 2.0 Paves Startup Employers More Than Employment

Modi 2.0 Paves Startup Employers More Than Employment

On 5th July 2019 Finance Minister Nirmala Sitharaman presented the first General Budget of Narendra Modi Government 2.0. The finance minister stated that the budget has been presented with a 10-year vision in mind. The startups are being given a whole set of tax benefits to establish their company.

How Will Startups Benefit From This Budget

To boost thousands of startups in India, the government has begun the process of clearing the tax mess that had demoralized smart young people from innovating and turning their ideas into businesses. It has also announced a host of incentives to “release the entrepreneurial spirit” and help the young generation to create employment. Startup and their funder who file essential declarations and give appropriate information in their returns will not be accountable to any kind of scrutiny in respect of valuations of share premiums. The roadblock of establishing the identity of the investor and source of his funds will now be resolved by putting in place a mechanism of e-verification. With the capital raised by start-ups, it will not require any kind of scrutiny from the Income Tax Department.

Doordarshan: The Ideation Platform

In the Union Budget announcement the Government stated that it will start a TV channel exclusively for startups under the Doordarshan umbrella. This will provide a platform for startups to spread and communicate information in the industry. The channel will be managed and ideas will be implemented by the startup owners. This channel aims to disseminate and propagate their ideas and to interface with investors, hence will help them build their brands and reach out to potential customers and clients.

 The Angel Tax Problem – Resolved

Startups have smart ideas and are funded by ‘angels’ to turn them into a real business. The ministry has a big breather to the startup as the Angel Tax is levied at a rate of 30.9% on net investments in excess of the fair market value. Now, when a startup raises funding from a Category-I AIF (Alternative Investment Fund), it doesn’t need to explain how they arrived at the fair market value of the shares issued. The Finance government has now extended this to Category-II AIFs as well, allowing startups to raise money from private equity funds, debt funds, and real estate funds, without having to explain the fair market value of the shares issued to these funds.

The finance minister’s announced that no harassments would be done to the startups and put an end to the practice of tax terrorism. She has put numerous checks and balances that pending inquiries and verifications can only be done by an assessing representative after getting approval from a supervisory officer.

The government addressed relief norms for startups to carry forward losses from previous years, to offset tax liabilities once the startup incurs profits. The union budget states that entire original shareholders continue to be a part of a startup, it can carry forward losses. Even if some of the original shareholders have left, if the other shareholders continue to hold at least 51% of the shares, the startup will be eligible to carry forward losses. This is a vital decision as it will boom young entrepreneurs, and encourage more power and improve their ability to sustain immediate losses, knowing that they’ll get tax benefits in the future.

 

This Union Budget shows Modi government walks the talk, and will prove it by their 10-year vision plan. The government wants to create a perfect environment for startups, encouraging young entrepreneurs to solve India’s unemployment problem.

                                                                                                                                                                                                                                Image Source- mns 

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