The Union Budget 2019 was just announced by the first woman full-time Finance Minister, Nirmala Sitharaman. This year, the Budget focussed on start-ups in India. The BJP-led National Democratic Alliance (NDA) declared a host of incentives, including setting up a TV programme on Doordarshan exclusively for these companies.
The TV programme will serve as a platform to bring the venture capitalists and the start-ups together. In Sitharaman’s words, “the TV programme will be designed and executed by start-ups themselves”.
The Budget came as a breather for several start-ups having a hard time dealing with angel tax. Angel tax is imposed when a privately-held company raises funds at a high rate, more than its ‘fair valuation’. Previously, India charged 30% angel tax. It was introduced in 2012 in a bid to curb money laundering via small companies.
The start-up sector has been reeling under a 3-pronged challenge, namely, high cost of credit, lack of adequate funding, and numerous regulatory bottlenecks.
The government has also eased FDI rules for start-ups dealing with segments such as e-commerce, grocery, and food delivery. It proposed several incentives for electric vehicles that could help EV start-ups, improvements to the digital payment systems that could help fintech start-ups, and made sure that these companies do not feel the heat of angel tax for the income tax department.
The Finance Minister also added in her speech that there would be no scrutiny on the valuation of share premiums for start-ups. A mechanism will be put in place for e-verification.
The Finance Minister continued saying that the IT department will not evaluate the funds received by these start-ups such as Category II AIF funds.
The maiden Budget speech also proposed an extension of the period of exception of capital gains for start-ups. So, the date has been extended to 31 March 2021 for carrying forward and set-off of loss from capital gains from the sale of residential houses.