Finance Minister Arun Jaitley, while presenting the Union Budget 2016 for in Parliament on Feb. 29, promised generous incentives and a slew of tax sops to the existing start-up firms to boost the government's ambitious initiatives Startup India and Standup India.
In addition, the finance minister also announced that entrepreneurship training will soon be introduced in schools across the country and via online courses as well. As part of the same initiative, the government has reportedly imparted training to 76 lakh youths through the National Skill Development Mission and plans to set up 1500 multi-skill training institutes.
"With almost three out of four funded start-ups registering outside India, the new registration bill along with tax deduction for three out of five years is a welcome move. This is in line with the Startup India campaign announced by the prime minister last month. Apart from the tax incentives, the other areas which we are equally important and not highlighted include exit rules for start-ups , incubation and start-up hubs road map, training of entrepreneurs, which can be a joint effort from multiple organisations like NSDM, Skill India, MHRD and others," Tarun Pathak, senior market analyst at Counterpoint Research, told International Business Times India.
Here are key takeaways of Budget 2016-17 related to start-ups in India:
- To encourage setting up of start-ups, the government announced 100 percent tax deduction for three out of five years via Minimum Alternate Tax (MAT) in the Companies Act (only for start-up companies set up during April 2016 and March 2019)
- Capital gains will not be taxed on the invested sum in regulated/notified funds and by individuals in notified start-ups, in which they hold majority share
- Government lowered the corporate tax rate for companies which have a turnover of Rs.5 crore or less to 29 percent plus surcharge and cess, from 30 percent plus surcharge and cess. Jaitley also announced a corporate tax rate of 25 percent for all new manufacturing companies incorporated from 1 April (2016), on a condition that the company does not claim any exemptions [previously it was 30 percent]
- Government promised to introduce a new bill soon to relax the registration process for companies so that it can be registered within a day
- Plans to set up a separate hub to support SC/ST entrepreneurs
- Rs 500 crore allocated for the Standup India scheme, which also mandates banks to provide easy loans to women and SC/ST entrepreneurs
- Government plans to introduce entrepreneurship training across schools, colleges and also via online courses on a larger scale.