Startups were definitely let down by Budget 2016. Here’s why

When the budget was announced in the parliament yesterday, Indian startup owners were disappointed since they had expected more from the budget after a lot of promises were made by the Modi government to aid startups in the recent past.

The proposals announced were anyway anticipated, but the removal of burdensome tax rules did not happen, which they had wanted.

However, Finance minister Arun Jaitley kept PM Modi’s word on tax breaks on profits made by startups, and proposed an amendment in Companies Law so that people find it easy to start a business.

"PM Modi svery high expectations for startups in his January speech," Ravi Gururaj, Chairman of software industry group Nasscom's product council told ET. "The budget today is lukewarm at best for startups."

Jaitley announced 100% profit deductions in three out of the first five years for startups that are started between April 1, 2016 and March 2019, and also said that investors in unlisted companies will be eligible for long-term capital gains treatment in two years instead of three.

Vijay Shekhar Sharma, the founder of mobile marketplace Paytm, added that reducing the time-frame for capital gains to two years looks like a positive step for promoting start-ups, it would not have any major impact because few investors leave the startups in two years. To add to the woe, startups normally don't make profits in the first few years, which means that tax breaks won’t do much good.

"Startups will still be liable for MAT (Minimum Alternate Tax), so the effective benefit is not likely to be very significant," he said.

Jaitley also said that the cabinet has approved the 'Stand Up India' scheme and Rs 500 crore have been allotted for Dalit and women entrepreneurs.

However, confusion between "goods" and "services" for online downloads has not been cleared because of which foreign entities continue to sell their products without paying any taxes.

Image source