Govt to simplify ESOPs, may give tax benefits to startups in budget

To boost startups and entrepreneurship in India, the government is planning to consider a series of benefits including simplified ESOPs for startup employees and tax sops for startups in the upcoming budget.

DPIIT, the body responsible for policy on startups, and revenue department have discussed a set of packages and the above-mentioned concern from the startups said a TOI report quoting sources.

Besides, DPIIT has also been planning to give angel tax benefits to PE funds and debt funds, who have out of any govt concessional ambit till date. At present, Angel tax concession is only available to AIFs (Alternate Investment Funds).

It has also been seeking other benefits for AIFs. A proposal has also been presented for a GST exemption for fund managers based in India.

Startups and SMEs have also sought a mechanism in place to ensure business with the govt. As per new rule, 20% of all procurement of Government departments should be done through startups, the same is not being enforced, complained startups.

A couple of days ago, LetsVenture has suggested ESOPs and liquidity policies for startups employees. Opening up discussion for required policy, it sought a balanced framework in favour of startup employees.

There is a need for a proper policy that can facilitate startups employees to get ESOPs in a transparent manner, Ganesh Nayak, Director of LetsVenture had emphasized.

At present, employees of the startup are taxed when they exercise their options and convert ESOPs to shares. Earlier, Startups had raised concern on this and demanded that Esops should be taxed when the actual sale happens.

Last week LocalCircles, a community management and social media platform, in a letter to Finance Minister Nirmala Sitharaman, had urged improvement in series of issues related to startups and SMEs including faster TDS refund, Angel tax, startup-friendly GST and ESOP taxation.

The first union budget of the new government is due to be presented on July 5 in the Lok Sabha.