As one would’ve expected from this Union Budget announcement, the government focused its attention heavily on the digitisation of India. The motto for today’s announcements revolved around three major reforms — transform, energise and clean India — also being called TEC India. And how can one forget about startups and investors while talking about reforms for the country’s economy.
During his speech at the parliament, Jaitley announced some taxation reforms for startups and other small or middle-sized businesses. The government has decided to relax the income tax liabilities applied on startups. The profit deduction period for entrepreneurial juggernauts has also been increased from the previous three out of five years. The startups can now claim 100 percent deduction of profits for three out of the first seven years.
Modi Government have also made some Great Moves for the Employees of a New StartUp. Now They can decide how much EPF amount to be deducted every Month. Further Government has made EPF a TAX FREE scheme, It means Employee don’t have to Pay TAX on thier PF Amount. In this Scheme Investor and Employee both Contribute Same amont of Money every Month.
Speaking about this move, Pranay Bhatia, Partner – Direct Tax, BDO India, says,
In line with the expectations any change in substantial shareholding shall not impact carry forward of losses provided promoter retain their stake. Incentive boost from 3 out of 5 years to 3 out of 7 years is also a welcome move.
Further, the Budget is also taking into account the growing number of small business in the country. The MSME sector is now commanding control over the financial growth and thus, the government is incentivizing them. The Corporate Income Tax for medium and small-scale enterprises has been reduced by 5 percent. This is, however, applicable to those with a turnover of 50 crores or more. And currently, only 6.67 lakh employees fall under this category.
However, reforms in the Companies Act aimed at setting up simplified and digitised has been skipped in the Budget announcement. There had been changes announced in the same during last year’s budget. These changes were aimed at helping companies register in a single day.
The government has also not announced any update of the Angel Tax and Google Tax front, two major reforms that startups have asked for multiple times. However, MAT credit entitlement has been increased to 15 years and help incentivize credit availability to startups. Talking about the same, Sandeep Aggarwal, Founder, ShopClues and Droom , says,
There are a lot of things I was hoping 2017 Union Budget to touch upon for example policies to ensure that capital is easily accessible to entrepreneurs, repatriation of money coming to India, R&D credit, no capital gain for any kind of start-up sale or exit and to make foreign listing for any Indian company straightforward.
In the government’s efforts to attract foreign investments, Finance Minister Jaitley said in his budget speech that he’s dissolving the agency often criticised for bureaucratic red tape. The Foreign Investment Promotion Board (FIPB) will be abolished and major reforms for Foreign Direct Investment (FDI) policy will also be introduced.
This change will make it easier for investors to pump money in sectors ranging from civil aviation to pharmaceuticals. The said board was responsible for clearing applications for direct investment by outside investors. This might also lead Apple to make drastic changes to their ambitions for bringing iPhone manufacturing to India.
Further, another big move from the government is directed towards foreign portfolio investors. The investors, who’re constantly pumping capital into Indian startups, will now be exempted from indirect transfer provisions. Foreign investors will not have to pay tax after cashing out on their investments i.e offshore derivatives with India derivatives. This initiative from the government is aimed as a massive push for increasing foreign investments
This initiative from the government is aimed at giving foreign investments a much-needed boost. If you look at current scenario of funding in the country, prominent investors like Tiger Global and Rocket Internet have pulled out whereas Sequoia has been missing in action. The same has created a slowdown in India and impacted the investment being received by giants, even like Flipkart.
In his speech, FM Arun Jaitley praised the demonetisation move and requested the country to adopt cashless modes of transaction, such as the BHIM app or the newly announced Aadhar Pay. The ultimate focus of Budget 2017 has been on the improvement of India’s technology standards and the upliftment of those in rural areas.