The economy of
any country depends on quality of its people. Larger the number of employed
people, better will be the economy. The importance of promoting entrepreneurs
has been recognised by the Indian Government. 'Startup India, Stand up India'
is one such campaign for creating a conducive environment for startups in
India. It aims to boost entrepreneurship, encourage startups with job creation
and building an economy driven by technology.
For empowering
startups to grow through innovation and technology, the Indian Government
announced startup India: Action Plan [plan] which addresses all aspects of the
startup eco-system. The plan proposes a 19 point action list which inter-alia
includes compliance regime based on self-certification, startup India hub,
rollout of mobile app and portal, legal support and fast-tracking patent
examination at lower cost, faster exits, funding support through a 'funds of
funds' with a corpus of INR 10,000 crore, etc. It also proposes to provide tax
exemptions on profits, capital gains, and investment above fair market value
subject to fulfillment of certain conditions. The objective to give these
exemptions is to promote investments into/growth of startups and address the
working capital requirements.
Recently, the
Government has issued a notification wherein the term 'startup' has been
defined and the procedure for its recognition and obtaining tax benefits has
been prescribed.
The Union
Budget 2016 is well aligned with the startup India campaign. In line with the
plan, the Budget proposes the following initiatives for startups:
■ Amendment in
the Companies Act, 2013 to improve enabling environment for startups and ensure
registrations of companies in one day.
■ Hub to
support Scheduled Caste [SC] and Scheduled Tribe [ST] entrepreneurs. Further,
INR 500 crore has been earmarked for SC/ST and women entrepreneurs under the
Startup India scheme.
■
Entrepreneurship education and training to be provided through Massive Open
Online Courses so that they can connect to mentors and credit markets.
With a view to
provide an impetus to start-ups and facilitate their growth in the initial
phase of their business, in line with the plan and notification issued by the
Government, effective from assessment year 2017-18, the following tax exemptions
and incentives have also been proposed:
■ Section
80-IAC to be inserted to provide 100% deduction of profits derived by a
eligible startup engaged in eligible business, subject to fulfilment of certain
conditions. The proposed deduction will be available at the option of the
assessee for any 3 consecutive assessment years out of 5 years beginning from
the year in which the eligible start-up is incorporated. Eligible start-up
means a company which is incorporated on or after 1 April 2016 but before 1
April 2019; the total turnover of its business does not exceed INR 25 crore in
any of the financial years beginning on or after 1 April 2016 and ending on 31
March 2021; and it holds a certificate of eligible business from the
Inter-Ministerial Board of Certification as notified in the Official Gazette by
the Central Government. Eligible business for the purpose of claiming the above
tax deduction means a business which involves innovation, development,
deployment or commercialisation of new products, processes or services driven
by technology or intellectual property.
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