Tax Incentive for Startups Extended by 1 more year, says FM Sitharaman
Synopsis: Finance Minister, Nirmala Sitharaman has extended the tax incentives till 31 March 2023 for the start-up sector.
In 2021, 42 start-ups emerged as unicorns in India, which is the highest recorded number of unicorns ever produced in a year (a Unicorn is a start-up that attains a valuation of $1 Billion or more). India has also outperformed the United Kingdom to turn into the third-biggest country to generate unicorns. India produced 42 unicorns in 2021 to arise third after the US and China.
The country currently has approximately 61,400+ startups with nearly 75% of districts having at least one start-up.
The start-ups incorporated on or prior to March 31, 2022, were eligible for this incentive structure, while on February 1, 2022, Sitharaman extended this eligibility to March 31, 2023. Such new businesses will be qualified to receive a 100% tax refund on the profits made for a span of three years in an aggregate time span of 10 years of business operations given that the overall yearly turnover doesn't surpass Rs 25 crore in any financial year.
Such a move is probably going to aid start-ups in meeting their functioning capital necessities, particularly during the early years of their operations.
"Over the last few years, India has witnessed significant development in the start-up segment. To give this segment a boost, the eligible start-ups incorporated prior to and on 31 March 2022 had been given a tax rebate for three continuous years out of the 10 years of their incorporation. Considering the pandemic, I propose to broaden the span of incorporation of the qualified start-ups by another year, till 31 March 2023 for giving such tax incentives," said Sitharaman in her budget speech.
According to the Economic Survey, there are an accumulative of 61,400 new companies identified by the Department for Promotion of Industry and Internal Trade (DPIIT), of which at least 14,000 joined the list in FY22. At the point when India's startups' funding environment has been flourishing, the FM said that a panel of experts will be set up to inspect and recommend suitable measures.
"This is due to the fact that investing entities have subsidized over Rs. 5 lakh crore last year contributing to one of the biggest startup and development ecosystems. Expanding this investment needs a comprehensive assessment of regulatory and other different frictions," said FM in her speech.
Moreover, to foster the agriculture and rural start-ups, the FM declared that a fund with mixed capital, raised under the co-investment framework, will be streamlined through NABARD.
"This is to fund new businesses for rural and agriculture entities that are prominent for the value chain of crop production. The functions for these new companies will consist, inter alia, aid for FPOs, machines required by the farmers on a rental premise, technology as well as IT-based help," she added.
Responding to the declaration, co-founder of agritech startup Arya.ag Prasanna Rao said, "The Union Budget has commenced the phase of development for the agritech domain in India. The commendable focus around the post-harvest contemplations regarding millet cultivation is a welcome move and will assist with improving the nation's farm produce quotient. The Budget has also positioned AgriTech in the right spotlight with the Finance Minister resting confidence on the role of today's modern players to evolve the farming segment in the country under the PPP model. Besides this, the Finance Minister's confirmation on government aid for small farmers and FPOs to acquire farming tools as well as get access to innovation-driven abilities and services is certainly on the correct path. Overall, the expectation to instill a solid element of digitization in the form of Kisan drones for crop evaluation, in the agriculture value chain, will catapult India's spot in the global farming sector."
Drone start-ups as well, saw an uplift in the Union Budget, with the FM declaring that start-ups will be supported to facilitate ''Drone Shakti' through applications and for Drone-As-A-Service (DrAAS).
The FM additionally said Defense R&D will be opened up for new businesses, with academia and industry with 25% of the Defence R&D budget reserved for this purpose.
Other declarations set to nurture the startup environment in India, constitute the FM's announcement of establishing the Center for Processing Accelerated Corporate Exit (C-PACE) to work with and accelerate the voluntary exits of these organizations from the presently expected 2 years to under a half year.
This, alongside the declaration that IBC will be revised to help cross-borders bankruptcy, should assist business people with restarting, NASSCOM shared in a tweet. Building a public platform for the National Digital Health Ecosystem consisting of electronic libraries of health facilities and health providers, distinctive health recognition, assent structure, and universal admittance to health facilities, would also be a good potential lift to the HealthTech start-up realm.