The Indian Government is all set to present its Union Budget 2016 on February 29, 2016. There are various speculation coming forth relating to how will the budget for the current financial year look like. The budget is expected to cover the current economic issues concerning taxation, Goods and Service Tax (GST), etc.
However, the special focus of the Union Budget this year will be on how to make doing business easier and convenient for entrepreneurs. With Prime Minister Narendra Modi’s Start Up India, Stand UpIndia initiative, it is expected that the budget will have some key notes on establishing, managing and maintain start-ups across the country. The predictions have come following the initiative that this government has been taking on startups and entrepreneurship since its emergence, which has never been done earlier by any other government.
The new start-up revolution initiated by the Modi Government aims at eradicating the unemployment problems spread across the country along with helping youth talent to grow and participate in the “Make in India” dream of the prime minister. The budget is likely to be the one framed for hard-working families as well as budding startups. It will ensure adequate promotion of the economic development in the country.
On the other hand, there are still certain doubts as the start-ups have been facing several challenges for so long. Hence, Indian startups and entrepreneurs are looking forward to getting relevant explanation and clarification on questions relating to prior challenges that startups faced. The government is required to clarify how it would create and prompt proper development and implementation of the venture capital and incubator schemes.
What clarifications the government needs to make?
Startups and entrepreneurs are awaiting Union Budget 2016’s revelations. They are looking forward to getting clarifications relating to the challenges that the startups have been facing.
Startup taxation: Startups desire to get tax breaks. The Union Budget is expected to ease the tax structure and clarify angel tax challenges. Angel equity investments should be exempted from tax. This will encourage more angel investors to spend on startups and help entrepreneurs get funds from individuals. Venture capital funds would be looking for no tax on angel investments. In short, the startups want the government to give tax benefits to them in the Union Budget 2016.
Service tax applicable: Startups in the budget should be provided with service tax exemption as it poses huge pressure on them. This will help them be more competitive in the market. Though the service tax limit is expected to rise, exemption of service tax in the seeding stage would help startups to deploy their funds.
Long-term capital gain tax: The Union Budget is expected to introduce long-term capital tax reduction. The tax reduction in capital gain tax on investments made in unlisted firms, especially startups. A long-term capital tax of 20 percent is imposed on 3-year investment done into unlisted company.
Groundwork and incubator schemes: Groundwork is required to be done on this so that the scheme does not stay confined to paper only. The budget must provide detail of 10,000-crore rupees fund decided to be disbursed for startups. When the government announced Startup India policy, it mentioned “fund of funds” (FOF) to make VC investments that will in turn invest in startups. The government also specified the establishment of 35 new incubators in already existing institutions and 35 private-sector incubators newly established with government financial aid.
Tax Regime: In the Union Budget, the startups aim at simplifying tax regime, including service tax returns, TDS returns and MCA filings, which are considered as unnecessary burden on entrepreneurs and startups. Initiatives to boost startups are expected to be revealed in this budget.
Labour law compliance: After the announcement made about Startup India initiatives, the Ministry of Labour and Employment took steps to ease labour compliance measures for entrepreneurs and startups. According to this initiative, the startups will be allowed to self-certify compliance with the labour laws.
E-commerce and Digital India: The Union Budget is expected to focus on enhancing e-commerce platforms and Digital India mission. This is because of the global growth of It sector that inspires each and every business sector at the moment. The budget session will make sure the B2B e-commerce startup ecosystem is inspired. Thereby boosting the startups and entrepreneurs.
GST implementation: Implementation of new GST Act will help make the whole tax structure convenient. This will enable cutting business costs and help generate more revenues. GST is expected to gain more focus in the Union Budget 2016, which seems to have numerous benefits of the Indian economy.