For entrepreneurs and every business, it is very crucial for managing their tax liabilities in a proper way so that they can attain and absorb maximum benefit out of the tax policies of our country. And, if you are a budding entrepreneur, it becomes even more significant as in the slew of tax exemptions and various benefits, they could pick out the best ones for them.
When we talk about the taxation policy, it has undergone some drastic changes as far as the Union Budget of 2016-2017 is concerned. These changes are made under the ‘StartUp India’ Policy and touted to result in a large number of concessions and exemptions.
Following are some of the headlines of startup tax in India, which will enable you to take the full benefit of the policy changes in the tax system of our country:
100% Tax Exemption for First Three Years:
The Finance Minister Arun Jaitley said while announcing the 2016-2017 Union Budget in the Parliament that, “It is proposed to provide a deduction of 100% of the profits and gains derived by an eligible startup from a business involving innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.” It is an incredible step taken by our government to promote a budding business that they are not liable to tax on their profits for the first three years of their businesses operations except Minimum Alternate tax (MAT).
Abolition of ‘Angel Investment Tax’:
It is another relief provided by the Central Government and under this, angel investors, i.e., family and friends and domestic funds not registered as VC funds, which one raises from venture capital firms set up for the very purpose of backing such ventures, will not be taxed on these investments with respect to certain restrictions that the start-ups have to fulfill to attain this benefit.
Setting up of a ‘Fund of Funds’ for Startups:
In order to help start-up businesses and them a necessary financial boost, Modi Government has decided to set up a fund with an initial corpus of Rs. 2,500 crore and a total corpus of Rs. 10,000 crore over a four-year period. The fund is planned to come under FoF (Fund of Funds) under the direction of SEBI. A board of professionals will manage this funds and support a whole range of sectors like manufacturing, health, agriculture, etc.
Exemptions in Capital Gains Tax:
Whenever you sell a property, there is a Capital gain tax that you have to pay to Government. Recently, the rate of tax is 20% but it is exempted for start-up businesses. There will be no tax charged on profits from the sale of land, shares, stocks, bonds, capital assets, etc. Also, some favorable changes have been made in the Double Tax Avoidance Agreement (DTAA).
Other Tax Adjustments and Fund Allocations to Boost Startups: Some other significant tax adjustments for initial beginner businesses in India are as follows:
- New provisions for SC/ST entrepreneurs.
- Allocating Rs. 500 crore for SC/ST and women entrepreneurs in India.
- Lowered long-term capital gains for two to three years.
- Provision of EPF (Employee Provident Fund)
- Amendment in the Motor Vehicles Act to enable entrepreneurship in the road transport sector.
So, these policies are here to help the businesses in India grow on a large scale. These policies under the “StartupIndia” scheme of the government as proposed in the Union Budget 2016-2017 seem to be made for the purpose of providing impetus to all budding ventures so that Indians would have to look upon to foreign countries for employment.
