Finance Minister Arun Jaitley has already indicated that the
Budget will lay out concrete steps towards the implementing the recommendations
of the Startup India Action Plan. The proposals include new e-governance platforms, simplified compliance, intellectual property rights support and easy exitprovisions, among others. The Government is due to set up a superfund of INR
10,000 crores to supplement the available venture funding for startups. On the
tax front, capital gains will be exempt upon fulfillment on certain conditions.
The investors will also enjoy exemption from capital gains arising from
investments, if reinvested in a fund authorized by the Government. A 3-year income
tax exemption for startups is also likely to come into force.
One of the big points of contention for new businesses is
the “angel tax” applicable on individual investors (angels not a part of any
fund) u/s 56(2)(viic). It applies on any share premium received by an unlisted venture,
calculated on the basis of the difference between fair market value and actual funding.
This seriously hampers early stage and pre-revenue startups that primarily
depend upon angel funds and many of them are forced to register themselves out
of India. The investor lobby has made a representation to the Finance Ministry
for considering an exemption to small ticket investments of less than INR 10
crores. The much awaited GST implementation is expected to finally see the
light of the day mainly because the Government has acknowledged the impediments
the current complex tax environment poses and has shown commitment towards a
unified regime.
Announcements are also likely in the areas of Digital India
initiative, Make in India initiative and Smart cities project. These critical
infrastructural enablers will prove instrumental in creating new business
opportunities and expanding the existing ones.