The Union Budget 2017-18 has come as a great relief to the Indian startups. As the ruling government has advanced its ongoing initiative to encourage and strengthen the startups, the Finance Minister, Mr. Arun Jaitley, has proposed to extend the period for availing the benefits of tax in the first 7 years of the existence of the startup company which was earlier 5 years.
In his speech for the Union Budget 2017-18, Mr. Jaitley said that the deduction available for three years for the startups out of five years has been changed to 3 years out of 7 years. The financial bill that has been presented by the government states, the startups have now been given the permission for the computation of their total income for 3 consecutive assessment out of 7 years which will begin from the year under which the startup is eligible and incorporated. Earlier, the period of claiming the same was set to 3 consecutive assessment out of 5 years in which the startup is incorporated.
In addition to this, the main purpose of carrying forward the losses of the startups, the condition of the 51 per cent of the holdings for voting rights has been relaxed. However, this provision is based on the condition that the holding of the original promoter(s) will continue for a longer period of time. On the issue of the removal of the MAT (Minimum Alternate Tax), the Finance Minister in his Union Budget speech said that it is not practical or possible to reduce or remove the MAT from the startup sector in the present scenario. On the other hand, to allow the companies to make use of the MAT credit in the future years, the Finance Ministry has proposed that carry forward of the MAT credit to a period of fifteen years which was ten years earlier.
In addition to this, the Finance Minister has also proposed the reduction of the income tax for the smaller companies and the startups that have an annual turnover of 50crores INR to as much as 25 percent. This step is in order to make the MSMEs (Micro, Small and Medium Enterprises) more viable and to boost the firms and the startups to make the migration to the company format.
With the passing of the Union Budget 2017-18, many startups have welcomed the same with open arms. The startups like Paytm, the Founder and CEO thinks that the Union Budget 2017-18 can be considered as “a digital economy budget”. He explained that every aspect of the proposal made by the Union Budget 2017-18 would strive towards making India a dream digital economy. He claims that the amendments like the benefits from tax, the incentives for using the digital wallets and the efforts of the government to stretch the loan which would be based on the digital footprints will all contribute to the creation of large merchant ecosystem for enabling the digital payments. In addition to these, the incentives for the labor-intensive sectors like farming, housing, and dairy will enable the SMEs for the creation of new jobs.