Start-ups may get relief on ‘innovative’ tag for tax sops

The Budget is likely to exempt start-ups from being certified as ‘innovative’, making it easier for them to receive tax exemptions.

At present, start-ups that are certified by the Department of Industrial Policy and Promotion (DIPP) receive tax exemptions for a period of three years.

“Income-tax benefits, as announced last January under the Start-up India Action ,are not easily accessible to start-ups because the nature of their business has to be certified as ‘innovative’ by the DIPP first, in order for them to become eligible for the benefits. The upcoming Budget is expected to announce the removal of this clause,” KS Viswanathan, Vice-President, Nasscom, told BusinessLine .

He said all start-ups registered as a company in India should be made eligible for Income Tax benefits as investors would have already carried out due diligence on the innovative nature of the business before funding them. “Introducing one more step to certify them as innovative is just one more hindrance”

According to Vishawanathan, the DIPP has certified 500 start-ups in the past 12 months.

Of the 5,600 tech start-ups in the country, 1,200 were added in the past 12 months.

The Start-up India Action Plan defines a start-up as an entity incorporated or registered in India not prior to five years, with an annual turnover not exceeding ₹25 crore in the preceding financial year, working towards innovation, development, deployment or commercialisation of new products/processes/services driven by technology or intellectual property.

Yogendra Vasupal, founder-CEO, Stayzilla, an online marketplace for stays, expects the Tourism Ministry’s proposed plan to exempt the homestay segment from service tax or commercial levies and the plan to take the licensing process online to be announced in the Budget speech.

“The Centre and and the States spend a lot on promoting destinations and boosting tourism. Getting the locals to open up their homes to tourists is an easier way to meet the demand for stays, rather than setting up hotels and lodges from scratch. We have partnered with seven State governments to develop and promote homestays and provide training to the hosts,” Vasupal told BusinessLine .

While fintech start-ups have benefited from the demonetisation and continue to see large-scale adoption of digital payments and digital lending, they expect the Budget to further incentivise digital payments and provide for enabling infrastructure.

“As SMEs become more proficient with electronic payment systems, they will be encouraged to adopt digital finance channels, presenting an opportunity for fintech firms to bring these SMEs into the formal digital financing/lending ecosystem,” said Sashank Rishyasringa, co-founder and Managing Director of online lending platform Capital Float.

Neelesh Talathi, Chief Financial Officer of online furniture marketplace Pepperfry, said: “Budget 2017 will provide further impetus to the scorching pace of growth of the e-commerce sector in India through tax reforms. GST is the cornerstone to realising the dream of one-country, one-market, as it can potentially resolve impediments in inter-State movement and unburden e-commerce of a multitude of taxes such as Entry Tax.”

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