Startup India is a project of the Indian Government. The initiative was announced in New Delhi by our Prime Minister, Narendra Modi, during his Red Fort address on 15 August 2015.
The arrival of the Goods and Services Tax (GST), the 2016 Code on insolvency and bankruptcy, and the General Anti-Avoidance Rule are responsible for bringing more business under government surveillance and preventing fraud and corruption.
The 2017 OECD data cuts India’s growth estimate to 7 percent, as per Secretary-General Angel Gurria, India is top among the G-20 nations in tax policies, also calling for legendary and beneficial reforms.
The hurdle is to maintain the reform trend to produce investment and profitable employment possibilities. Besides this, the government wants to seek a remedy to significantly higher corporate taxes, income tax rates, sluggish methods of acquiring land, and non-performing loans.
Startup India – Entrepreneurs’ boon
Startup India is indeed an Indian government flagship project introduced in January 2016 to support entrepreneurs on their business through innovation and start-ups characterized by the Industrial Policy and Promotion Department as an entity, whether incorporated or registered in India.
The objective of the Startup India Action Plan include
- Simplifying the procedure
- Financing support and incentives
- Industry-Incubation and Academic Partnership
This policy helps those business owners with no business background, by giving assistance via mentors, accelerators, investors through apps, learning facilities, The plan’s silver lining would be that it allows entrepreneurs to self-certify under 6 labor laws and 3 environmental laws, and to run away the tiresome process of going around different government offices and fairly long paperwork.
Do you know? Hiring a Tax consultant will make this process much easier.
The incentives of Start-up can be based on tax or non-tax based, such as:
- Enabling support through a Fund of Fund with INR 10,000 crore corpus
- Startup Credit Guarantee Fund
- Capital gains tax exemption
- 3 Year Tax Exemption for startups
- Tax exemption on Investment above fair market value
State governments can provide tax incentives but generally opt for nationwide incentives. The latter is further classified based on-
- Location-
- Industry
- Export
- Activity
These include financial incentives for enterprises located in the special economic zone (SEZs) or less developed regions; incentives for particular industries.
Such as power, ports, highways, electronics, and software; freshly established Indian companies, startups acknowledged under the National Startup Policy and a new industrial enterprise
Funds not listed in the venture capital category (VC) are not taxed on their investment in a start-up such as family and friends’ domestic funding or funds that are categorically raised from VC companies founded to finance such projects.
In addition, the 2012 Angel Investment Tax exemption is valid. It makes the investments from angel investors, a former entrepreneur, or a specialist who offers start-up or growth capital in successful companies and serves as indirect consultants.
Finance Bill Amendments, 2018
- 100% of start-up deductions for 3 years in a row out of seven years, if it is founded between 01.04.2016 to 31.03.2018, and turnover of 25 crores per year from 01.04.2016 to 31.03.2021. The segment will also gain from start-ups introduced from 01.04.2019 to 31.03.2021. In addition, for the very first seven years after the start date, the turnover cap of INR 25 crores will apply.
- In addition to the applicable surcharge, start-ups are obligated to pay a total minimum alternative tax [MAT] of 18.5% and to abandon MAT deductions for the first 5 years, if start-ups fail to benefit.
- Investment in Government Special Funds will be made in long-term capital gains (LTCG) u / s 54EE. The capital expenditure can go up to INR 50 Lakh and be invested within 6 months of the transfer date and 3 years are exemptions.
- Domestic firms with turnover below INR 5 Crore will be responsible for 29% tax in 2014-15 alongside surcharge and other cessations.
- The Finance Minister also suggested various taxes on or after 1 March 2016 for the latest domestic manufacturing firms. These businesses are charged with cessation and surcharge at 25 percent higher. The tax is paid on the terms unless the organization declares any benefit or investment benefits.
