Here’s What Arun Jaitley Promised Startups in Budget 2016

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The Government of India presented the Union Budget 2016 on February 29 with a special focus on the Startup India, Standup India program initiated by it. It emphasised more on the development of startups and entrepreneurs. Finance Minister Arun Jaitley proposed Rs 500 crore fund for entrepreneurs belonging to women and backward class. The most surprising announcement was a relaxation of three-year tax for business startups.

The budget has made the registration easier for startups by allowing them to get their companies registered in a day. The Union Budget looked like a reflection of Prime Minister Narendra Modi’s Standup Action Plan that was proposed in January 2016. But there were certain loopholes observed in the budget, including no information regarding exit policy and startup listing norms. In addition, there were no clear details available in the budget relating to GST implementation.

Some of the key points of the Union Budget 2016 are as follows:

Tax applicability

·         Startups: The finance minister made startup operations convenient by proposing 100 percent tax deduction for companies for the first three years. The proposition will be effective for startups and entrepreneurs who will be launching their businesses between April 2016 and March 2019. But there will be no relaxation on the minimum alternate tax applicable for such businesses.

·         Angel investment: The angel investors have been demanding for rationalisation on capital gains tax levied when they invest in a start-up. The government, in its budget has accepted their request. Jaitley said that capital gains tax will be exempted from tax if the investors will pay in a regulated/notified “Fund of Funds.” In addition, the holding period relating to exemption of capital gains tax applicable for long terms has also been reduced to two years, which was earlier three years.

     Corporate tax: The rate of corporate income tax for 2016-17 has also been reduced to 29 percent. Earlier in 2015, companies with turnover of below Rs 5 crore had to pay a corporate income tax at the rate of 30 percent.

     Tax rebate: The Indian finance minister proposed that the tax rebate will be 10 percent for earnings coming from global patent filings. This is one of the best proposals for the tech industries that manufacture or produces tech-savvy machineries like robotics and artificial intelligence.

While discussing the tax rebate proposal, Jaitley jotted down the importance of research. “Research is the driver of innovation and innovation provides a thrust to economic growth. I propose a special patent regime with 10 per cent rate of tax on income from worldwide exploitation of patents developed and registered in India,” Jaitley said while addressing the parliamentary budget session.

Reacting to the Union Budget, Ashwani Rathore, CEO and Co-Founder, SpiderG said, “This union budget is well balanced and perfectly linked with the vision of Prime Minister’s ‘Startup India Standup India’ campaign with 100% deduction on profit for startups for 3 out of five years. This exemption will reduce compliance burden and cash outflows. The decision of allotting 500 crores for Startup segment is a welcome move which will encourage entrepreneurship in coming years.”

Finance entrepreneurs

The Union Budget 2016 has proposed Rs 500 crore funding for entrepreneurs from the scheduled caste/ scheduled tribe (SC/ST) community along with self-employed women. Jaitley advocated making 2016 the year of entrepreneurship for SC/ST. The proposal has been made to benefit 2.5 lakh entrepreneurs.

The Central government has decided to partner with Dalit Indian Chamber of Commerce and Industry and other associations to establish spots where SC/ST entrepreneurs get exposure. With the help of these institutional hubs, entrepreneurs from these categories will get a chance to fulfil obligations mentioned under the Central Government Procurement Policy 2012. This will help them adopt world class business practices.

Convenient business operation

Red-tapism and huge documentation work are the two complaints that mostly come from a new company. The Union Budget has vowed to make some relevant changes to the Companies Act 2013, which will be introduced in the Budget Session of the Parliament. This will enable a convenient environment for new businesses to operate. The first thing as mentioned earlier is that the companies will be able to register themselves as start-ups just in a day.

Entrepreneurship training

The Government knows very well the difficulties people face when they set up a startup. It is necessary for every entrepreneur or startup to initiate an education culture to train employees. The government aims at introducing a separate entrepreneurship education and training in 2,200 colleges, 300 schools and 500 government institutions. It also targets reaching Massive Open Online Courses ventures to deliver training at 50 vocational training centres. According to the proposal, 1,500 skill training institutes will be established across the nation, estimated cost involved being 1,700 crore for the initiative.

Digital certificate database

The finance minister stated that a digital repository will be created to store all kinds of certificates, including school/college leaving certificates, diplomas, awards and recognitions, etc. This will help monetise opportunities for Digital India startups.

Aadhar to have legal support

The government advocated offering a legal support to Aadhar initiative. The new Aadhar bill will be introduced in the current parliamentary session. This will make transfer of subsidies direct and convenient along with easing security schemes. Aadahr’s role will play a great role in Digital India initiative if the amendment takes place. As far as business is concerned, it will benefit fin-tech startups.

Author Bio

Susmita Pathak Mishra

Guest Blogger

Susmita works as on Online News Reporter besides being a mother of two. She has acquired a Masters degree in Journalism & Mass Communication. Writing is her hobby and she loves to listen to soft music.

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