Budget 2015: What startups got and missed out on
Startups are disappointed with Budget for not bringing any tax reform because of which they would still have to pay taxes for every round of investment they receive.
Updated:
By Amrita Premrajan, TimesJobs.com Bureau
As the Union Budget 2015-16 was unveiled on February 28, 2015, Indian start-ups questioned the mobilisation of the Rs 10,000-crore fund announced in the last budget. They are also disappointed with the Budget for not bringing any tax reform for start-ups because of which they would still have to pay taxes for every round of investment they receive.
What happened to the Rs 10,000-crore fund?
Budget 2015-16 didn’t mention anything about last year's Rs 10,000-crore start-up fund that has not yet been mobilised. And this time again the Finance Minister, Arun Jaitley, set aside Rs 1,000 crore to help start-ups.
"The government seems to have spoken of another Rs 1,000-crore start-up fund with no news about the Rs 10,000-crore start-up fund announced in the last budget. Rather than announcing more funds, focus needs to be given on the utilisation of these funds and how it will impact job creation," Alan D Souza, CEO, Vavia Technologies, told TimesJobs.
Divakar Vijayasarthy, founder, MeetUrPro, said the new Rs 1,000 crore start-up fund created through Self-Employment and Talent Utilisation ( SETU) mechanism is a welcome initiative. "While the initiative is commendable, the effective implementation needs to be ensured to make the usage of funds successful."
"The biggest miss for start-ups was no resolution of Section 56(2) of the Income Tax Act that taxes start-ups on investments they receive from angels if they are above fair market value," Saurabh Srivastava, co-founder, Indian Angel Network, told TimesJobs.
This was on top of the pre-budget wishlist of start-ups as well as investors because under this Act, entrepreneurs had to pay a substantial 33 per cent tax for every round of funding they receive, if the shares issued in lieu to investors was above book value.
GAAR post-ponement a good move
"GAAR provisions in the present form are regarded as draconian by the investor community and deferment with a possible revisit to the provisions making them practical would certainly boost the investment climate," said Vijayasarthy.
As the Union Budget 2015-16 was unveiled on February 28, 2015, Indian start-ups questioned the mobilisation of the Rs 10,000-crore fund announced in the last budget. They are also disappointed with the Budget for not bringing any tax reform for start-ups because of which they would still have to pay taxes for every round of investment they receive.
What happened to the Rs 10,000-crore fund?
Budget 2015-16 didn’t mention anything about last year's Rs 10,000-crore start-up fund that has not yet been mobilised. And this time again the Finance Minister, Arun Jaitley, set aside Rs 1,000 crore to help start-ups.
"The government seems to have spoken of another Rs 1,000-crore start-up fund with no news about the Rs 10,000-crore start-up fund announced in the last budget. Rather than announcing more funds, focus needs to be given on the utilisation of these funds and how it will impact job creation," Alan D Souza, CEO, Vavia Technologies, told TimesJobs.
Divakar Vijayasarthy, founder, MeetUrPro, said the new Rs 1,000 crore start-up fund created through Self-Employment and Talent Utilisation ( SETU) mechanism is a welcome initiative. "While the initiative is commendable, the effective implementation needs to be ensured to make the usage of funds successful."
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What startups missed out on?"The biggest miss for start-ups was no resolution of Section 56(2) of the Income Tax Act that taxes start-ups on investments they receive from angels if they are above fair market value," Saurabh Srivastava, co-founder, Indian Angel Network, told TimesJobs.
This was on top of the pre-budget wishlist of start-ups as well as investors because under this Act, entrepreneurs had to pay a substantial 33 per cent tax for every round of funding they receive, if the shares issued in lieu to investors was above book value.
GAAR post-ponement a good move
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Implementation of General Anti-Avoidance Rule (GAAR), which limits tax avoidance, has been a contentious issue. Start-ups have welcomed the move to defer GAAR applicability by two years."GAAR provisions in the present form are regarded as draconian by the investor community and deferment with a possible revisit to the provisions making them practical would certainly boost the investment climate," said Vijayasarthy.
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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.
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