Union Budget 2016: Deliver on the promise of 'Start Up India', say entrepreneurs

The start-up community is looking for tax breaks, especially on angel investment, an extension of the ease-of-doing-business philosophy, as well as resolution of long standing bills likes the GST from the upcoming Union Budget 2016

e4m by exchange4media Staff
Updated: Feb 25, 2016 7:56 AM
Union Budget 2016: Deliver on the promise of 'Start Up India', say entrepreneurs

The start-up community is looking for tax breaks, an extension of the ease-of-doing-business philosophy, as well as resolution of long standing bills likes the GST from the upcoming Union Budget 2016.

We spoke to some startup owners about their expectations from the forthcoming Union Budget 2016 and this is what they had to say:

Explaining why the start-up community has high expectations from the Union Budget 2016, Raghav Chandra, Co-founder of UrbanClap, said, “The Indian government has recently given the start-up community many reasons to rejoice. The blueprint of ‘Start Up India, Stand Up India’ enlisted many initiatives that are bound to boost the entrepreneurial space of the country including tax breaks, income tax exemptions for the first three years and smoother incorporation procedures. However, the Union Budget is when many of these decisions will be ratified.”

High on the priority list, say start-ups are tax breaks as well as less stringent bankruptcy laws. In fact, even Anand Mahindra, Chairman of Mahindra Group, alluded to this recently. “Government should put in place institutions that encourage entrepreneurship. It should set up regulations, like bankruptcy laws, which makes it easier for people to move in and out of business and leave the rest to us. Remove the stigma against failure, make the penalty of failure minimal and make the fear of failure go away," he had said while speaking at a business conference on the sidelines of the ‘Make In India’ week.

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Dinesh Goel, Co-founder and CEO of Aasaanjobs, also opined that most eyes would be on two bills ---the Bankruptcy Bill as well as the GST Bill. According to him, these would be pivotal towards freeing up red tape and allowing businesses to adopt a more flexible model catering to the market. “This would not only create a demand for new job roles in the services and manufacturing sector but also give companies the green signal to scale up their recruitment and grow fearlessly," he said.

Dinesh Agarwal, Founder and CEO of IndiaMART, also agreed that the industry was expecting a quick implementation of GST, streamlining processes for speedier implementation of large infrastructure projects. Speaking about the other key things that the Budget should deliver on, he pointed out that skill development, especially to tap the ‘Make In India’ initiative would be essential as it would be a huge growth driver for the economy.

“Providing a special package for the MSME sector will help sustainable growth. Development of infrastructure is a prerequisite for growth. Similar to road and rail, creation of Digital Highways is elementary in order to provide high bandwidth internet network across India. We would like to see avenues of PPP in the coming union budget which will give shape to Digital India,” he added.

In terms of taxes, some of the demands include providing tax benefits as well as clarification of existing taxes and laws. For example, Sujayath Ali, CEO and Co-Founder of Voonik, wants the government to bring clarity as to what constitutes B2C e-commerce and marketplace model, as this would make the FDI policy easier to understand.    

“We are awaiting clarity on the angel tax. While the Finance Minister mentioned that provisions will be made in the income tax act for exemption to a notified class of investors, we are still awaiting details. Even though a three year income tax holiday is given to new startups, the issue of service tax is not addressed yet. I hope in the new budget, some laddering like that of income tax slabs is given to startups. This will help us to invest a part of our revenues in business, reduce our dependence on VC funds and once we reach a certain stature we can definitely pay service tax at par with other listed companies,” he said.

This point was also echoed by Umang Shah, Co-Founder and Head (Innovation & Marketing) at RedMango Analytics, who also demanded the removal of taxation on investments by angel investors and a three year service tax benefit. “Startups need tax breaks. Taxing startups in the same manner as established companies makes a huge dent on our cash flows and hinders our capacity to grow; which is the most important thing for a startup. TDS not applicable for three years of a startup and an income tax offset of up to 1 crore,” he suggested.

Explaining the problems with taxation on angel equity investments, he said, “Currently, if an angel invests at a higher valuation than a startup, the startup needs to pay income tax on the amount taken over and above current valuation, which is taken as either amount of equity put in by founders (if at the stage of starting the company). This means that one cannot start a company if they themselves don’t have the funds or net worth of the company (if 1-2 years old company). Since startups would take at least 2-3 years to start generating positive cash flows, this again makes is difficult for startups to access funds.” He is of the opinion that if both the company and the investor have agreed on a valuation, then that should not be challenged by the IT department.

Rahul Agrawal, Co-founder and CEO, Mebelkart, also opined, “Access to capital is not the need of the hour. Government has a crucial role to play in the ecosystem of being the enabler more than participant. It remains to be seen whether tax holiday will be extended to service tax and ease of filing tax returns as well. Verdict on implementation of GST will be a game changer. To promote entrepreneurship, angel investment should be exempted from taxation.”

Meanwhile, Ali also mentioned the need for financial innovation for easy credits to SME and small traders to address the challenge of liquidity, when there is a need to suddenly scale up to cater to a huge online demand. “I feel, the new budget should encourage NBFCs to create fast, easy and reasonable loans for the sellers who start selling through online retail. If in the new budget, government can announce rebates/ subsidies through mobile money platforms, this will help us in encouraging prepaid order placing, thus reducing our cash on delivery handling costs,” he further added.

“Service Tax is a bane currently for all startups, especially the ones in controlled marketplace model. I hope the government is able to get a solution to this which is business friendly in this budget session,” said Debadutta Upadhyaya, Co-founder at

Sairee Chahal, Founder and CEO, expects clarity on taxation policies (direct and indirect) along with ESOPs, tax relaxations and ease of doing business, etc. “Also look forward to less formalities, paperwork, legalities etc. to start up,” she added.

While most of the new age companies are setting up with a strong funding foot, Major Prashant Rai, Founder and CEO of, is also expecting more relaxation, possible tax exemptions and incentives with an easy entry into services and exit plans thereafter, along with more clarity on the norms. Rai said that the Prime Minister unveiled the startup action plan by announcing excellent measures, now it depends on how the policy takes shape in the budget 2016. He further opined that it is imperative for Indian on-demand service market place startups to raise funds in a more structured, regulated yet in a stimulating environment and being featured in Indian exchange.

“While ‘Start Up India’ has clearly shown the intention of the government in this area, the budget needs to follow it up with an action plan and clearly implementable rules around all the announcements. Taxability of angel investments and stopping the flight of startups outside India must be addressed,” reiterated Anjani Kumar, Founder and CEO, SUCCESSWRKS.

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