The Union Budget for 2017-18 was presented amid high expectations in the wake of the impact of demonetisation. With the government focusing on boosting the start-up sector, the industry was hoping for the Budget to help improving the ease of doing business for the start-ups.
Increased tax exemption
One of the highlights of the Budget for start-ups is the increase in profit-linked tax exemptions from 5 years to 7 years. Start-ups recognised by the Department of Industrial Policy & Promotion (DIPP) can avail of this benefit. This will also encourage more start-ups to get registered under the Startup India initiative. Also, given that start-ups rarely make profits in the first few years of operations, this is a very welcome announcement.
Reduction in income tax rate
A significant reduction in income tax rate to 25 per cent from the current 30 per cent for companies with an annual turnover of up to Rs 50 crore has also been announced, which is a great encouragement to the MSME sector. Though this is bound to cost an estimated revenue of about Rs 7,200 crore to the government, it could benefit about 96 per cent of companies in India. It was heartening to see the government taking such a step in favour of the sector.
Minimum Alternative Tax (MAT)
Though the start-up community had asked for Minimum Alternative Tax (MAT) to be done away with completely, its extension to 15 years from the current 10 years is, nonetheless, a positive step forward. It could substantially increase the availability of credits for Indian start-ups.
Removing the condition of 51 per cent voting right and revising it to the holding of the original promoter(s) for the carrying forward of losses is in line with the start-up ecosystem's evolving environment. However, it is available to only those start-ups that are recognised under the Startup India policy.
(Ajai Chowdhry is founder of HCL)
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