Startups Eagerly Wait for the Union Budget 2020-21

In three days, India will know what the Budget 2020 has in store for each sector. This is going to be a highly anticipated Budget since startups are pinning their hopes on the government to take appropriate measures to enhance the ease of doing business.

The startup fraternity wants and expects lower personal taxes so that the net disposable income increases. When income increases, people will have more money to spend, leading to more demand. This will facilitate the recovery of the declining economy.

The liquidity crisis for startups is also applicable to the payment delays they face from their clients, specifically the large public sector companies. Startup companies are hoping that with the Union Budget 2020, there will be a mechanism put in place to ease this crisis. The government needs to take stronger actions to ensure tax payments are made on a timely basis.

With time, the percentage of women with higher positions is increasing, and hence more allocations and schemes need to be implemented to empower women. A significant number of women with low incomes work in micro and small businesses. So, if appropriate steps are undertaken, this segment can help in reviving the country’s declining economy.

Also Read: Union Budget 2020 Expectations: Tax Relief for Investors

With an aim to develop a robust ecosystem for promoting startups in the country, the Department of Industry Promotion and Internal Trade (DPIIT) has announced the formation of the ‘National Start-up Advisory Council’ (NSAC). This council will recommend measures for fostering a culture of innovation in all sectors. The Union Trade and Industry Minister, Piyush Goyal will be chairing this council. He will also be suggesting several ways by which economic growth can be revived, and incentives can be generated for large scale jobs.

At the same time, the tax structure around the employee stock option (ESOP) is also a concern for startups. It is crucial for any startup to retain its talent, and tax for ESOP comes into play while employees are exercising it. The demand was that tax should apply only when those shares are sold.

The current economy needs an instant booster to increase consumption. Startups anticipate the Budget to have new provisions which could result in improving the overall consumer spending. Bringing down the personal income tax rates could be one of the probable moves that could act as a booster shot.

Indian startups look forward to the Union Budget which is scheduled to be announced on 1 February. Nirmala Sitharaman, the Finance Minister, will be announcing the fund allocation for various sectors as well as determine the economic contours for the fiscal year ahead.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in.