To encourage the Indian startup ecosystem, the Indian Government is reviewing tax structure to make it more attractive for young entrepreneurs in the country.
According to a media report, ahead of Primi Minister Narendra Modi’s meet, scheduled on Nov 28-30, with startups and CEOs during the Global Entrepreneurship Summit in Hyderabad. It plans to tweaks the taxation policy.
While PM had announced a policy in 2015, several elements of the package need to be modified as per feedback received from entrepreneurs in early meets. Startups are a major thrust area for the Modi administration as they are not just seen to create jobs but also encourage entrepreneurship.
Earlier, the government allowed the tax benefit to be taken during the first seven years, as most startups do not make profits in the initial years of their operations.
However, currently, heavy taxes are levied on capital gains of angel investors, which according to NASSCOM has resulted in a 53% drop in angel funding during the first half of 2017.
Govt Startups programmes
In September this year, the Minister of State for Commerce and Industry C.R. Chaudhary said that under its Startup India, Stand Up India programme, the Government of India has extended tax benefits to more than 74 startups till date.
About 4,536 startups had been recognised as of September 7. Out of these, tax benefits were given to 75 innovative startups, it added. The Department of Industrial Policy and Promotion (DIPP) has considered 671 startups for income tax exemption.
While further tax changes are unlikely before the next Budget which is scheduled for February 1, some of the procedural issues can be fixed earlier if they only require change in rules through notifications.
The “Startup India Campaign” was launched by the Modi-government in 2015 and has been supported by a three-year income tax holiday in the first seven years of business and a slew of income tax concessions.