Startup hopes ride on big spends elsewhere

A slew of micro announcements, ranging from extension of tax holidays to providing an extra year to claim long-term capital gains on investments in startups, provide welcome stability, according to industry leaders who admit they expected Budget 2021 to offer more sops for the sector.The Finance Minister extended eligibility for startups to claim tax holiday by an additional year until March 2022, while also extending exemptions on capital gains from sale of long-term capital assets, if invested in eligible startup equities, by one year. While some sections of the startup community pointed out areas of friction with regard to both provisions – for instance, the exemption on paying income tax under Section 80-IAC so far has benefitted only 400 companies – others said there will be clear benefits that will accrue.“The amount saved will help startups focus on building products and services and also pass on a part of this value to the end consumer,” said Pankaj Makkar, MD, Bertelsmann India Investments.Sitharaman also removed the threshold for investment in the limited liability partnership. Norms for setting up of One Person Company (OPC) have been eased by removing restrictions on paid-up capital and turnover, and reducing residency limit of nonresident Indians from 182 to 120 days. However, experts are doubtful if startups would benefit directly.“The measure is laudable to boost OPCs which have lesser compliances, (but) practically startups will not take this up as raising investments into such entities is not possible and hence value creation is difficult,” said Amit Maheshwari, tax partner AKM Global. Despite the disappointment over unmet demands, startup leaders were enthused by the indirect benefits they expect will accrue to the sector from the big-ticket spending in areas from healthcare, where allocation has grown 130% to Rs 2.24 lakh crore, to education as well as the introduction of the new Labour codes.“There were a lot of measures that the industry expected in areas such as Esops and capital gains (parity with listed shares) on the taxation front, which have been left unattended,” said Gopal Srinivasan, managing director at TVS Capital Funds. “But myriads of micro announcements really add up to accelerate the government’s ease of doing business mission.”“Overall it is a good budget with support for digital payments, one year tax extension and the allocation of Rs 50,000 crore for the National Research Foundation,” said Kris Gopalakrishnan, cofounder of Infosys and an investor in startups.

from Economic Times https://ift.tt/2NZUWP3