Chennai: After initiating the big bang campaign “Start-up India, Stand-up India’, this year’s Budget did not announce any major measure to entice more people into entrepreneurship. Start-ups require government initiatives to create conducive environment rather than tax holidays, experts opined.
For the purpose of carry forward of losses in respect of such start-ups, the condition of continuous holding of 51 per cent of voting rights has been relaxed. It is now subject to the condition that the holding of the original promoter/promoters continues. Also the profit linked deduction available to the start-ups for three years out of five years is being changed to three years out of seven years.
The Budget also said that there was a strong demand for abolition of MAT. It is not practical to remove or reduce MAT at present. However, in order to allow companies to use MAT credit in future years, the Budget proposed to allow carry forward of MAT upto a period of 15 years instead of 10 years at present.
“The exemption from MAT has however, not been allowed, and an enhanced carry over period will not really help start ups from a cash flow perspective. Manavjeet Singh, Founder & CEO Rubique
“Most of the start-ups are not making profits. So the tax holidays are redundant. The government should have taken measures to create more conducive environment to build the start-up eco-system and incubators,” said Abhishek Goenka - Partner Direct Tax PwC India.
The investors in start-ups also wanted some incentives in making high-risk investments. “It would have been great if capital gains for startups were aligned with listed companies and there was some announcement regarding the regressive sec 56 as it is regressive and prejudicial and impedes the growth of innovative startups & job creation,” added Saurabh Srivastava, Co-founder at Indian Angel Network.
“While the VC funds do not come under Sec 56, it is discriminatory towards domestic investors and individuals. The focus on agriculture may help more start-ups coming up in that space,’ said Padmaja Ruparel of Indian Angel Network.
In order to make Micro Small and Medium Enterprises more viable and also to encourage firms to migrate to company format, the Budget proposed to reduce the income tax for smaller companies with annual turnover up to Rs 50 crore to 25 per cent. This will be beneficial for start-ups as well.
However, the industry is afraid whether this could force companies to remain small or split their businesses. “There was an expectation of an across the board reduction in the rate. Instead, a calibrated approach has been adopted and the reduction is only for companies with turnover of less than Rs 50 crore. I expect that there will be some safeguards against unnecessary arbitrage opportunities by splitting businesses,” said Goenka.