Startups get extended tax holiday, a new one-person company rule, but the ESOPs tax remains as it is

Feb 1, 2021

By: Sanchita Dash

Finance Minister Nirmala Sitharaman today presented the Union Budget

Here’s what she announced for startups

The threshold defining small companies expanded in a big way

The limit for paid-up capital increased four fold, and the turnover limit increased 10 fold.

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'Small companies' will now be defined as

Those with paid up capital not exceeding INR 50 lakh to not exceeding INR 2 crore

'Small companies' will now be defined as

Companies whose turnover is between INR 2 crore and INR 20 crore.

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Government to support a world-class fintech hub

It will be set up at the Gujarat International Finance Tec (GIFT) City.

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Government to now allow one-person companies (OPC)

Innovators can now form 1-person companies without restrictions, paid-up capital, or turnover norms.

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NRIs also allowed to set up OPCs

The minimum days of residency needed before setting up a company has been reduced to 120 days from 182 days.

A welcome step, says Anup Jain of Orios Venture Partners

"A welcome move for startups as 2 directors were needed and founders were forced to co opt others under the Companies Act,” he said

Startups get another year of tax holiday

Eligibility of claiming tax holiday extended by one year until March, 2022.

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Capital gains exemption for startup investment too get an extension

Finance Minister extended capital gains exemptions by one more year till March 22

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However, a big wishlist was ignored

Startups who wanted tax exemption on ESOP sale, saw that being ignored in the Budget.

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Check out Business Insider’s coverage of Budget 2021

These are the top 10 most-valued Indian startups