Budget 2017: A hit or a miss for Startups in India?

On Wednesday Finance minister Arun Jaitley announced the new policy on tax concessions for start-ups and said firms incorporated after 31 March 2016 could now avail of a three-year tax holiday in the first seven years of their existence. With the announcement of tax exemption the Union Budget 2017 encourages firms to migrate to the company format and makes MSMEs more viable. In the budget address, Jaitley said, “The profit-linked deduction available to start-ups for three years out of five years is now being changed to three years out of seven years.”

For medium and small enterprises with an annual turnover of up to Rs 50 crore has been reduced to 25 percent. R. Narayan, Founder and CEO, Power2SME said that the “The 5 percent reduction in the income tax rate to 25 percent (from the existing 30 percent) for smaller companies with a turnover of Rs 50 crore will make a huge difference to the revenues of MSMEs. He further emphasised that under the MUDRA Yojna government’s decision to double the lending target of banks  to Rs 2.44 lakh crore will serve to further boost the financial morale of the MSME sector.

The startups can be befitted to the concession only after presenting  their application to the DIPP, which will then be reviewed by a three-member inter-ministerial panel comprising a joint secretary from DIPP and representatives from the Department of Biotechnology and Department of Science and Technology.

Last year, the government granted income tax exemptions to startups with certain conditions while in this year budget has proved to be a boon for companies incorporated after 31 March 2016. For electronic manufacturers in India the government has increased the allocation for incentives under schemes like M-SIPS and EDF to Rs 745 crore. According to FY 2015-16 data ninety-six percent of the Indian companies filing returns will benefit from this lower taxation. 



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