Budget 2016: Three year tax holiday for startups sends right signals, says KT Chandy of EY

Finance Minister Arun Jaitley seems to have kept his promise by introducing a set of start-up friendly initiatives in Budget 2016.

"The concessional 10 per cent tax rate for India-developed patents should encourage technology-centric startups to set up shop in India," says KT Chandy, Tax Partner at EY.

While the three year tax holiday for startups sends the right signals, it is likely to have limited impact on the overall sector, feels Chandy.

A bill to amend the Companies Act will be introduced in the current session of Parliament for greater ease of doing business, Finance Minister Arun Jaitley said today in his Budget speech. "These measures including e-assessments, tax dispute resolution and Companies Act rationalizations are likely to go a long way in making India more startup friendly," he says.

However, Chandy feels that the introduction of the 6% 'equalization levy' on online advertisement expenditure paid overseas, could be a dampener for startups, which typically have high online advertisement spends.