To help startups and entrepreneurs raise funds in India, the Department for Promotion of Industry and Internal Trade (DPIIT) has, as part of its vision document, proposed amendments in income tax laws related to the sale of residential properties.
DPIIT in its recommendation has said to fine-tune Section 54GB (capital gain on transfer of residential property not to be charged in certain cases) and Section 79 (carry forward and set off of losses in case of certain companies) of the Income Tax Act.
As part of its Startup India Vision 2024, DPIIT reportedly to promote budding entrepreneurs wants to exempt proceeds on the sale of residential properties from capital gains tax as entrepreneurs often have to sell their residential properties to support the business.
Besides, DPIIT has also suggested reducing founders shareholding requirements from 50% to 20% and a mandatory holding period to 3 three years from the earlier five years.
It also proposed relaxation in Section 79.
Startup promoters for carrying forward of losses hold need to be reduced to 26 per cent, as it will encourage new investors to invest in startups, ET report quoted sources privy to the development as saying.
The DPIIT vision document is in sync with the govt manifesto unveiled last month.
In April, the ruling party in its manifesto had said that it will provide a ‘Seed Startup Fund’ of Rs 20K crore to promote and encourage startups and start a new scheme to provide collateral-free credit of up to Rs 50 lakh for entrepreneurs.
It also promised to facilitate setting up of at least 50,000 new startups and 500 new incubators and accelerators in the next five years.
In January 2016, the govt had launched Startup India initiative to support budding entrepreneurs and startups.
However, it was criticised for not living up to its promises as startups continued to face hardships in the form of ease of doing businesses and Angel tax. The govt also managed to spend only a small portion of funds allocated to support the startup ecosystem in the country.