The Government of India is reportedly reviewing the tax regime for startups, with the aim of integrating exemptions and incentives to attract more entrepreneurs. The development comes ahead of PM Narendra Modi’s meeting with startups and CEOs at the Global Entrepreneurship Summit in Hyderabad later this week.
As part of the initiative, various ministries of the Indian government have initiated deliberations to make the country’s tax structure more favourable for startups. The authorities are currently in the process of tweaking the taxation policies, on the basis of feedback received from the industry.
The government had originally made provisions for tax benefits on profits earned by startups in the first five years of operations. Given that most new companies struggle to make profits initially, it has since revised the plan to extend tax benefits to a total of seven years.
At present, heavy taxes are levied on capital gains of angel investors, which according to NASSCOM has resulted in a 53% drop in angel funding during the first half of 2017.
Elaborating further, NASSCOM President R. Chandrashekhar stated in a recent media interaction, “For the last two years, the government has agreed that it needs to be done. There have been some concerns about misuse (of the provisions). But the fear of misuse is there for any law.”
Others from the startup world have raised concerns over the complicated rules of taxation on employee stock options. Speaking on the matter, a government official requesting anonymity said, “The idea is to make the regime as attractive as possible and the concerns are sought to be addressed at the earliest.”