Finance Minister Arun Jaitley in his budget speech announced 100% tax deduction on profits for three out of the first five years for start-ups that will be set up between April 2016 and March 2019, under the ‘Start Up India’ scheme.
The ‘Start Up India’ initiative launched in January by the Prime Minster plans to move in the same direction by providing incentives to start-ups in the form of better incubation, talent and capital. To ensure that only deserving companies enjoy benefits of ‘Start Up Action Plan’, the government recently defined the term ‘start-up’.
A start-up company, according to the government, would have equity funding of at least 20% by incubation, angel or private equity fund, an accelerator or angel network registered with SEBI endorsing the innovative nature of the business.
We spoke to a few start-up owners to know their reactions about the new measures announced for this sector in Budget 2016:
Vijay Shekhar Sharma - Founder and CEO, Paytm: I am really happy for Aadhar and IndiaStack. Finally, the government has provided legislative backing that will unleash the full potential of such an incredible platform. With the focus on digital payments and incentives to start-ups, the Finance Minister has boosted our Prime Minister's Digital India and Startup India plans. Overall, the budget creates a strong foundation for sustainable growth in rural & urban India. Steps to further improve Ease of Doing Business will drive entrepreneurship which is essential for job creation.
Jason Kothari, CEO, Housing.com: Considering the liquidity issues and the subdued demand in the real estate sector over the last couple of years, we hoped for more from the union budget this year. We do welcome the government’s acknowledgement of the role start-ups play in job creation, and the tax holiday for the first 3 years of starting a company. We expect the real estate sector to benefit from the government’s focus on the infrastructure sector, notably roads and highways, and its promise of an effective credit rating system of infra projects that will enable high quality projects to attract more funding. The digitisation of land records under the integrated land management system will go a long way in simplifying land acquisition for projects. The government’s service tax exemption on houses less than 60 sq m, and the additional exemption of Rs 50,000 for housing loans up to Rs 35 lakhs for homes not above Rs 50 lakhs will improve home buyers’ sentiment.
Anuj Srivastava, CEO and co-founder of Livspace:Tax holiday for start-ups for three of five years of setting up the company and Amendment to the Companies Act to ensure speedy registration and boost start-ups are great indicators of the government’s move to promote the Start Up India movement and culture in India. Also the allocation of funds for multi skill development centres will ensure that the key gaps in acquiring the right kind of talent for start-ups are met commensurately.
Shashank ND, Founder & CEO, Practo: The Budget is a clear indicator by the government to bring development to the grass root level. The Finance Minister’s focus on health as one of the key pillars proves to show that everyone should have the right to live a healthy lifestyle. The fact that quality drugs will be made available by setting up 3,000 stores in rural India along with health insurance of upto Rs. 1 lakh per family; top up of Rs. 35,000 for individuals above 60 years, indicates that incentives should be made available to every Indian, irrespective of old age or income limitation. The government is constantly working towards creating a conducive environment to promote entrepreneurship and facilitate growth of the start-up ecosystem in India. The ease of registration process and the hope to complete the task in one day is a welcome measure along with the three year Tax holiday for start-ups. At least this will allow a speedy way to setting up a venture and help start-ups focus on building disruptive products and services without worrying about profits or losses.
Bhavish Aggarwal, Co-founder and CEO, Ola: We are excited to have an inclusive, forward-looking budget that lays a strong foundation for growth and development in the country. Focus on skill development will have a domino effect on employment, financial independence and GDP growth. It was quite encouraging to see the Hon'ble FM also address some key road transportation issues and set aside a requisite budget for infrastructure development. Creating inroads for entrepreneurship in the public transportation space and amendments in the Motor Vehicles Act to allow for innovations will provide a strong impetus towards enabling mobility for citizens. These proposed initiatives give us immense confidence as we work towards our mission of building mobility for a billion Indians.
Kulpreet Kaur, Co-founder, Shop Pirate Coupons: As expected the Union Budget 2016 has its focus on ‘Stand Up India’ and boosting the budding entrepreneurs. We expect that 2016 is going to be a fruitful year for women entrepreneurs as ‘Stand Up India’ scheme has allocated Rs 500 Crore for SC, ST and women entrepreneurs.
Kiran Murthi, CEO, AskmeBazaar: Honourable Finance Minister has presented a business friendly budget which is encouraging for young and fast growing India. The announcements made during the budget also include a 100 per cent tax exemption for three years for start-ups, which is a welcome step. The Minister also proposed an amendment of Companies Act to allow new start-ups to register in one day. These steps will help to create a favorable business environment in the country.
Varun Khaitan, Co Founder UrbanClap: For emerging businesses there are a slew of incentives to encourage angel investment and start-up activity, and in the process create additional jobs. Steps in this regard are tax exemption for three years out of the first five years. Start-ups look to gain from the government focus on employment and employability. Change in the definition of SME, focused intent on the GST bill and added infrastructure spending are all boosters for the economic environment and start-ups stand to gain from them.
Manoj Gupta, Founder, Craftsvilla.com: While the fine print will emerge eventually, I am happy that infrastructure has got a major emphasis in Budget 2016, with a total outlay of Rs 2,18,00 crore being earmarked for roads and railways together in FY17. Yes, all e-commerce companies will applaud the move to improve digital literacy in rural India., with clear numbers, like ‘of the 16.8 crore rural households, as many as 12 crore households do not have computers and are unlikely to have digitally literate people’. The global financial community will see that despite the urgent need to push growth, India’s budget has not wavered from the consolidation path and has stuck to the 3.5% fiscal deficit target, which is a positive sign. What I am really looking forward to is that the Budget has announced 100% electrification of villages by May 1, 2018. This means dignity and access to livelihoods for India’s hinterland.
Dinesh Agarwal, Founder and CEO, IndiaMART: There are all the right key words, in the Finance Minister’s 9 Point Agenda in this budget. Governance and Ease of Doing Business, Education and Skills, Infrastructure, Financial Sector and Tax reforms reflect dedication towards a pro Technology, Infra and Trade oriented year ahead. The budget intends to build robustly Agriculture and Farmers Welfare, Social Sector and Rural employment to further bridge the gap between Bharat and India.
Abhayanand Singh, Founder of muvizz.com: The budget announcing amendment in the companies act to ensure speedy registration will most certainly boost the start-up industry as the process will become a little easier. Which also means there will be more companies coming into the business, more money flowing in, more revenue generation if they work out fine. Another important thing said was the tax holiday for start-ups for 3-5 years from starting the company. Again an impetus worthy point, but how many of the emerging companies will be able to take its advantage? Will every company be able to turn out so many profits in the span of three years? The conditions of starting your own company may have relaxed a bit but is the environment conducive or more competitive is what we need to look at. The gestation period is good at 5 years.
Swati Bhargava, Co-Founder, CashKaro.com: This budget focuses clearly on growth, development and job creation with particular focus on empowering the rural sector. In January, Narendra Modi had launched ‘Start Up India’, ‘Stand up India’ initiative with the motive to take this sector to a new horizon. Clearly, this budget is in full support of that initiative. The government has allocated Rs 500 crore corpus for its Stand-Up India scheme, which was announced in January, to stimulate innovation and startup activity by women and SC/ST entrepreneurs. This will bolster entrepreneurship for SC/ST and as per estimates will benefit 2.5 lakh plus entrepreneurs.
Alok Saraf, Partner - Private & Entrepreneurial Group, PwC India: This budget is a Budget for the M&SME sector with various policy measures and tax incentives focusing on their needs. Policy measures on encouraging entrepreneurship, enhanced spending on rural development and infrastructure including on roads and railway, focus on developing one crore skilled workforce could be a big boost to the sector. On the tax side, tax holiday to start-ups, lower tax rate of 25% on new manufacturing facilities and increasing turnover threshold to Rs 2 crore for presumptive tax rate of 8% are all welcome moves for the sector. A thumps up from the sector.