“Start up India Stand up India” action plan was announced on 16^th January, 2016 for promoting start-up ventures to Boost Entrepreneurship and economic development in India. On 29^th February its time for the NDA Government to walk the talk and put the action plan into implementation. It is of prime importance to analyse the expectation of Startups from the Union Budget. Expectations of Startups from the Union Budget:

1. TAXATION– A 3 year tax holiday on income tax was a welcome move for the startups however it has been seen that startups hardly earn profits during the three years of its incorporation hence there needs to increase in 3 year window from the view point of startups. Further InterMinisterial Panel will decide who are eligible for tax Breaks which can lead to crony Capitalism. This is a huge area of concern which needs to be looked into the upcoming Finance Budget. The startup Community also expects the angel Tax to done away with and GST to be implemented in order to provide clarity on Tax Regime for the startups. The threshold limit of Service Tax should be increased for Startups as majority of startups would be providing services through a platform.

2. FUNDING– Government had allocated rupees 10000 Cr referred to as fund of funds for Investments for the growth of startups. There needs to be Impletation of Fund of Funds and more clarity should be on areas of investment of such funds. Further Debt Financing through SIDBI (Small Industries Development Bank of India) needs to be used judiciously. In small urban towns and cities VCs (Venture Capitalists) and Angel Investors are lacking  while in such towns and cities Banks are the chief source of Finance but banks can see startups as a defaulter and  raising finance can be a big issue for Startups Therefore the credit Guarantee of rupees 500 cores need to mobilized at the earliest.

3. INCUBATORS– Incubators play a vital role in development of Startups. The Government had announced set up of 35 new Incubators in existing Institutions and 35 new private sector Incubators in startup action plan. The startups expect budgetary allocations for set up of these Incubators.

4. EXIT FOR STARTUPS– Start up Ventures can be a high risk prone area hence there needs to be a fast track exit scheme for stratups. Winding up laws currently are quite old and not suitable for the startups. Exiting becomes quite a complex affair and Bankruptcy Laws needs to be implemented as quickly as possible.

5. IMPLEMENTATION OF DIGITAL INDIA– Apart from Direct measures there can be indirect measures for the growth of startups. Small Towns and Cities have lackluster internet Connectivity which can impede the growth of Startups and can be a hindrance in a way of a startup. Government needs to put the foot down and implement its widely awaited digital India Scheme and needs to allocate funds for better internet connectivity. Promoting e-commerce transactions can also go long way for promotion of startups.

6. FDI POLICY– There is a lack of Clarity in FDI Policy in terms of who are the startups eligible for FDI Investment. There needs to be a clear FDI Policy to be meted out in the Budget.

7. RELIEF FROM SERVICE TAX FOR STARTUPS– Startups should be exempted from paying service tax, as it is a huge burden on them. Exemption on service tax in initial years would help startups deploy their funds effectively.

8. REDUCTION OF LONG-TERM CAPITAL GAIN TAX– Government shall look at lowering the long-term capital gain tax on investments made in unlisted firms, particularly startups, to bring them closer to the levels prevalent for the listed companies.

9.IMPLEMENTATION OF GST– The implementation of GST Act will help simplify the entire tax structure, thereby cutting business costs and helping generate more revenues. GST is expected to bring a number of benefits to the Indian economy.

 

Further implementation of Single window Clearance, reductions in patent registration Fees, Elimination of Red Tapism, self Certification compliance, Innovative Schools for Innovative programs, freedom from Inspections could also be a boon for startups.

 

There needs to healthy nurturing of startups in its nascent stage using the above policies so that they can continue to grow and to provide for the economic development of the country. It needs to be seen in the upcoming Budget whether Government can provide for the promise it had stated earlier or there will be a disappointment for the growing Entrepreneurs of India.

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