One of the biggest highlights of the Union Budget 2019 is the emphasis on start-ups. The Angel Tax, which has been one of the most concerned issues for many start-ups in India, has been made more linear and less complex.
Currently, the Angel Tax is levied at a rate of 30.9% on net investments in excess of the fair market value. However, Finance Minister Nirmala Sitharaman’s announcement comes as a big breather for start-ups.
Sitharaman, in her Budget speech, said, “To resolve the so-called ‘Angel Tax’ issue, start-ups 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. The issue of establishing the 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 start-ups will not require any kind of scrutiny from the Income Tax Department”.
Sitharaman also proposed to carry forward and set off losses for start-ups and increase in-period of exemption of capital gains from the sale of residential house for investment in start-ups up to March 2021. She also mentioned about the start of a television programme in association with DD National, exclusively for start-ups.
Here’s how some of the Fintechs and Start-ups in the finance sector reacted to the Budget announcements.
Anuj Golecha, Co-Founder, Venture Catalysts, said, "There have been several key takeaways from this year's Union Budget for the start-up community. Primarily, the Government has resolved the raging issue of Angel Tax by eliminating scrutiny around valuation of share premium. It will also put in place a mechanism for e-verification to eliminate tax scrutiny around funds raised by start-ups as well. This will act as a catalyst in driving investment towards our start-up segment and promote cutting-edge technological solutions. It has also proposed measures to carry forward and set off losses for start-ups while increasing the period of exemption for capital gains through sale of residential house for start-up-centric investment up to March 2021.
“Moreover, the Indian start-up community will soon be witnessing another wave of start-up boom from rural geographies, as the Government will be launching a dedicated start-up programme on DD National, 80 Livelihood Business Incubators and 20 Technology Business Incubators for rural artisans. This is being done while also promoting research and development around avant-garde technologies including Artificial Intelligence and Big Data. Perhaps, all of these measures were the need of the hour for our start-up community and will create conducive environment for futuristic and globally scalable businesses in India."
Harsh Pokharna, CEO & Co- Founder, Ok Credit, said, "The Union Government has presented a brilliant Budget by tightly balancing the economic ropes vis-a-vis all sectors that are integral to our economy. This has been done while further catalyzing rural digitization and driving the reach of our formal economy with financial inclusion initiatives. Stand Up India scheme, with a vision to drive entrepreneurship, will also continue till 2025 and a dedicated programme will be broadcast on DD National to inspire and provide mentorship to budding entrepreneurs across the country. Scrutiny on valuations of share premium vis-a-vis Angel Tax has also been removed, which is another positive takeaway for the start-up community of India. We believe that the slew of measures taken will directly benefit our economy, drive growth, create jobs, and will increase credit penetration in the country."
Gaurav Chopra, Founder & CEO, IndiaLends, feels the announcement to setup a dedicated TV programme on DD exclusively for the Start-ups is a welcome move by the overall start-up Inc. “This dedicated programme will provide a medium to the emerging start-ups to connect directly with venture capitalists and will help understand and work on solving the issues faced by the start-ups in the country. The government’s intent and dedication to promote start-ups is clear through this move.”
Kunal Varma, Co-founder & Head of Products, MoneyTap, added, “For a country like India, where we are trying to address multiple sensitive factors viz. jobs, taxation, corporate, inflation, fiscal, etc., it’s always a very complex balancing act. The move on Angel Tax and reduction of unnecessary scrutiny will be welcomed by would be start-ups that are raising angel money. Although there’s still a lot more to be done on this front, it’s a start.
Further, the digital Push via a move like eliminating or reducing MDR for cashless payments is a great sign. This decision has more positive implications than what’s immediately obvious. While it will make transactions more convenient, encourage payment Fintechs to innovate around this space and reduce cash pilferage, it also has a second order positive effect of increasing the digital handshake between a consumer and the BFSI sector. Technologies like Blockchain and API-based financial solutions get a solid, data-rich platform with all the digital transactions.”
No doubt, the various initiatives aimed at the start-ups comes as a big boon for entrepreneurs and new players in the field.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
