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Even as the government is working on a roadmap to eliminate corporate tax exemptions and bring down the corporate tax rate to 25 per cent, Prime Minister Narendra Modi on Saturday gave big boost to Start-Ups through a flurry of tax incentives including tax exemption to start ups for a period of three years as well as exemption on capital gains.
As indicated by Finance Minister Arun Jaitley, these tax changes are likely to be implemented through amendments to the Finance Bill as part of the Union Budget 2016-17.
Tax experts welcomed the move but said more details would be required to understand how it will benefit the eco-system for Start-Ups.
“These measures will provide the much needed tax break to startups and should be welcomed. It will be important to analyse how startups are defined in the tax law and what conditions are imposed for the tax exemptions because more conditions will invite greater scrutiny by tax authorities at the time of assessments. Hopefully, startups will be exempt from MAT as well. Losses incurred by startups during the three year holiday period should be allowed to be carried forward,” said Rajesh H Gandhi, Partner, Deloitte.
In order to encourage creation of intellectual property in India, startups should also get tax breaks for R&D which is presently restricted only to manufacturing companies and proposed to be phased out in 2017, he added.
Implementation and creating awareness on the package for Start Ups would also be key for the government, said Sudhir Singh, Partner Advisory, PricewaterhouseCoopers.
“We need more details. It all sounds very good but implementation would be important,” he said.
Meanwhile, Jayant Krishna, Chief Executive Officer, National Skill Development Corporation (NSDC), which is also working to encourage skill development and entrepreneurship said, “Start up India offers immense opportunity to the youth where the government is also assuring them the ease of doing business. The youth can leverage this to create new opportunities for themselves and also create employment.”
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