What Budget 2017 meant for startups and MSMEs

NEW DELHI: Budget 2017 left much to be desired for the startups. The budget which focussed more on propelling the digital economy of the country gave some concessions to the startups while holding out on some of the major demands of the startup community.

Here are the top announcements concerning startups and Micro Small and Medium Enterprises ( MSMEs) made by the Finance Minister (FM) Arun Jaitley in Budget 2017:

Tax break
Partially conceding to the demands of the startups, the Finance Minister has increased the period of profit-linked deductions available to the startups to seven years from the current five years. However, the tax breaks is still only available on the profits made by startups for three years. Notably, this tax sop is only available to those startups which are recognised by the DIPP (Department of Industrial Policy & Promotion).

Minimum Alternative Tax
Although refusing to remove the Minimum Alternative Tax (MAT), as requested by the startups, FM Arun Jaitley has allowed the companies to carry forward their MAT to 15 years from the present period of five years. This provides the companies an additional five years before they become liable to pay their MAT.

Income Tax benefit to MSMEs
In order to give the Micro Small and Medium Enterprises a breather, the FM proposed to reduce the Income Tax for those companies with an annual turnover of upto Rs 50 crore to 25%. This gives the MSMEs a reduction of 5% from the current applicable rate of 30%.
This will benefit 96 percent (6.67 lakh) of companies in India at the expense of the government forgoing Rs 7,200 crore of revenue. The concession, hoped the FM, will give a platform for MSMEs to become more competitive vis-a-vis larger companies and will also enable firms to migrate to a company's format.

Carry forward of losses
For the purpose of carry forward of losses in respect of start-ups, the condition of continuous holding of 51% of voting rights has been relaxed subject to the condition that the holding of the original promoter/promoters continues.