Budget 2015 fails to resolve Sec 56, angel investors lament missed chance
Jaitley had added that Sick Industrial Companies Act (SICA and Bureau of Industrial and Financial Reconstruction (BIFR) have failed when it came to Bankruptcy of a company.
By Pranbihanga Borpuzari, ET Online | Updated:
The angel investing community on Saturday welcomed Finance Minister Arun Jaitley's move to bring changes to Alternate Investment Fund ( AIF) regime, proposal to bring a new Bankruptcy law and the new incubation fund while ruing the chance to correct the anomalies around Section 56 or Angel Tax.
Finance Minister Shri Jaitley in his Union Budget 2015-16 speech on Saturday proposed pass-through status to all sub-categories of Category I as well as Category II of Alternative Investment Funds (AIF) governed by regulations of Securities Exchange Board of India ( SEBI) to streamline the taxation regime of AIFs. The Finance Minister also proposed to allow foreign investments in Alternate Investment Funds keeping in view the need to increase investments from all sources.
Jaitley had added that Sick Industrial Companies Act ( SICA and Bureau of Industrial and Financial Reconstruction (BIFR) have failed when it came to Bankruptcy of a company. "We will bring a comprehensive Bankruptcy Code in fiscal 2015-16, that will meet global standards and provide necessary judicial capacity," Jaitley said.
According to Saurabh Srivastava, co-founder, Indian Angel Network (IAN) the budget is good for foreign investment / fund as tax pass through for AIF Funds will encourage more funds. "Bankruptcy law reform will greatly help startups and the Rs. 1000 crore for incubation is good but a lot will depend on its deployment. However, the big miss for startups has been government has failed to provide a resolution for Section 56, which taxes startups on investments they receive from angels if it is above fair market value," said Srivastava.
According to IAN President, Padmaja Ruparel, the budget was focused on growth investment and job creation. "It was a forward looking budget where the big points of federalism came through. This is the only government focused on startups and the Bankruptcy law being changed is a big plus. While culturally we have started accepting startup failures we now need to accept failures through a policy side and this will allow entrepreneurs to move on," said Ruparel.
According to her the AIF Category I and II becoming part pass through will attract foreign investment in the risk capital and will also remove a lot of anomalies that was creeping in. Another positive, according to her, has been the Rs. 1000 crore incubation scheme .
"The big miss for me has been Section 56 or the Angel Tax. It has been neither removed nor tweaked and I think it is a very big miss. Angels bring very high quality money and focus on incubation with the Rs. 1000 crore fund can come to naught since the next stage is angel investing, where you continue to have problems. There has been no recognition of angel money by private investors and this anomaly is a big disincentive for the ecosystems. You can keep seeding and incubating companies but if they do not have money to grow and scale, there is little of no use," said Ruparel. She added that others aspects like right shifting of taxes for startups and ring fencing against service and excise taxes have also not been tackled in the budget.
Finance Minister Shri Jaitley in his Union Budget 2015-16 speech on Saturday proposed pass-through status to all sub-categories of Category I as well as Category II of Alternative Investment Funds (AIF) governed by regulations of Securities Exchange Board of India ( SEBI) to streamline the taxation regime of AIFs. The Finance Minister also proposed to allow foreign investments in Alternate Investment Funds keeping in view the need to increase investments from all sources.
Jaitley had added that Sick Industrial Companies Act ( SICA and Bureau of Industrial and Financial Reconstruction (BIFR) have failed when it came to Bankruptcy of a company. "We will bring a comprehensive Bankruptcy Code in fiscal 2015-16, that will meet global standards and provide necessary judicial capacity," Jaitley said.
According to Saurabh Srivastava, co-founder, Indian Angel Network (IAN) the budget is good for foreign investment / fund as tax pass through for AIF Funds will encourage more funds. "Bankruptcy law reform will greatly help startups and the Rs. 1000 crore for incubation is good but a lot will depend on its deployment. However, the big miss for startups has been government has failed to provide a resolution for Section 56, which taxes startups on investments they receive from angels if it is above fair market value," said Srivastava.
According to IAN President, Padmaja Ruparel, the budget was focused on growth investment and job creation. "It was a forward looking budget where the big points of federalism came through. This is the only government focused on startups and the Bankruptcy law being changed is a big plus. While culturally we have started accepting startup failures we now need to accept failures through a policy side and this will allow entrepreneurs to move on," said Ruparel.
According to her the AIF Category I and II becoming part pass through will attract foreign investment in the risk capital and will also remove a lot of anomalies that was creeping in. Another positive, according to her, has been the Rs. 1000 crore incubation scheme .
ADVERTISEMENT
"The big miss for me has been Section 56 or the Angel Tax. It has been neither removed nor tweaked and I think it is a very big miss. Angels bring very high quality money and focus on incubation with the Rs. 1000 crore fund can come to naught since the next stage is angel investing, where you continue to have problems. There has been no recognition of angel money by private investors and this anomaly is a big disincentive for the ecosystems. You can keep seeding and incubating companies but if they do not have money to grow and scale, there is little of no use," said Ruparel. She added that others aspects like right shifting of taxes for startups and ring fencing against service and excise taxes have also not been tackled in the budget.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The limit of reduction of health insurance premium was enhanced from Rs 15,000 to Rs 25,000. For senior citizens this limit has been increased from Rs 20,000 to Rs 30,000.
"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.
Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.
Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.
Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.
"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.
Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.
Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.
Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.
ADVERTISEMENT
