Expert OpinionGovernment Policies

[EXPERT OPINION]: Policies Impacting Startups – Budget 2019 Update

0

Modi governments first budget after being elected by an overwhelming majority in the Election 2019 by NDA had raised the expectations from the public at large for a big bang Budget but fiscal compulsion and a reality check had turned the mindset of people that this would be the Budget that would be high on 5 year road map and low on near term delivery.

Given the circumstances, the FM laid-down the broad guidelines for achieving a $5T economy by 2025. The Government also continued with its fiscal consolidation path by sticking to the fiscal deficit target of 3.3% for FY20 and the same would be partly financed by borrowing from international markets.

Budget 2019

The Budget 2019 also focused on attracting overseas money thereby offsetting part of the problem of lack of capital in the domestic markets.

For Start-ups the Finance Minister had quite a few items which will make life easier. The key point being relief from Angel Tax scrutiny by the Income Tax department.

To resolve this issue, the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums.

The issue of establishing the identity of the investor and source of his funds will be resolved by putting in place a mechanism of re-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department.

Budget 2019

Parliament. Image: Business Standard

Also the mention of labour law reforms and combining the close to 44 labour laws into 4 codes as follows:

  • Code for wages – this should consolidate laws on minimum wages, bonus etc.
  • Code for social security – would consolidate laws on PF, ESI etc.
  • Code for Safety – would consolidate laws from Factories Act, Mining etc
  • Code for Industrial relations would consolidate laws on industrial disputes

Once these codes become a life they will really help start-ups and small business as these reforms should simply compliance and reduce the cost of compliance.

Read Also: [EXPERT OPINION]: Starting with Entrepreneurship? Resist this if you want to be a successful one.

Other key highlights were:-

  • Bootstrap support: a period of exemption of capital gains arising from the sale of residential house for investment in start-ups extended up to 31.3.2021 and conditions for claiming this relaxed.
  • Incubators: 80 livelihood incubators, 20 tech incubators to help create 75,000 skilled entrepreneurs in agriculture and rural industry
    Support provided to private entrepreneurship in adding value to farm produce
  • Kayakave Kailasa: train 10 million youth to take up industry-relevant skill training through the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) India to enable youth to work on new-age skills like AI, IoT, 3D Printing, VR, and Robotics. This should help with current issues on untrained or out of date resources available to start-ups and will also help them in developing better products. This could also help in strengthening the off-shore development centres market as these are technologies of the future.
Budget 2019

The NDA government. Image: Youth Incorporated Magazine

  • Standup India: Scheme will continue until 2025, this scheme enables entrepreneurs to get bank loans between up to Rs. 1 Crore from banks. However, the scheme limits it to one SC/ST or women entrepreneur per bank branch. Which can make extending this benefit not really beneficial. (more details on https://www.standupmitra.in/Home/SUISchemes)
  • There is a lot of work being done by start-ups in the electric vehicle space and the budget proposed tax breaks for purchasing these vehicles which should help with demand.

Read Also: [EXPERT OPINION]: LinkedIn WON’T Work for These Kinds of Startup Owners – Are You One of them?

Aside from the taxes and incubation, there was also a proposal for starting a TV channel exclusively for start-ups to be run by DD. Though being on DD may give it limited visibility to start with but this could be a good way for start-ups to get eyeballs and advice. We will need to see how this is implemented and how government red tape affects it.

Other aspects of the budget addressed the overall economy and focused on structural reforms and behavioural aspects of society. It has highlighted the achievements of the last 5 years in terms of uplifting the large section of the society, taking bold decisions in terms of bringing path-breaking reforms and focusing on governance.

Budget 2019

Budget 2019 for startups. Image: Inc42 Media

Budget 2019 is very high in terms of taking path breaking initiatives like an indirectly reducing stake in state-owned enterprises, opening up gates for foreign money to flow in, taxing the super-rich with higher rates, incentivizing fight against climate change, igniting skill India and facilitating ‘Make In India’.

To sum up, Budget 2019 is setting a path for a $5 trillion economy by outlining a host of measures in the area of Make In India, labour reforms, financial sector reforms, social impact, enhancing ease of doing business and forcing acclimate change.

Overall a positive signal to the start-up ecosystem of India. Now its about execution.

WANT TO BE AN EXPERT WRITER ON COFOUNDERSTOWN? CLICK HERE!

Comments

Leave a reply

Your e-mail address will not be published. Required fields are marked *