The FM proposed extending the startup tax holiday scheme to startups incorporated till March 31, 2023
In the run up to the Budget, this was one of the most popular demands by the startup ecosystem
Sitharaman lauded the economic contribution of Indian startups in the past couple of years
At the Union Budget 2022, finance minister Nirmala Sitharaman proposed extending the startup tax holiday scheme to startups incorporated till March 31, 2023, in addition to the startups that had already been eligible for the exemption.
Till now, the tax holiday was available for startups incorporated till March 2022. Last year, the FM had announced a similar one-year extension to the startup tax holiday policy.
In the run up to the Budget this year, one of the most popular demands by the startup ecosystem was the extension of the tax holiday. This is particularly important since the number of new startups increased in 2021 for the first time in six years. Founders had told us that an extension of the tax holiday for startups would be a great way for the government to show its commitment towards building a robust and dynamic startup environment.
India’s Startup Tax Holiday
In the Union Budget of 2017, the then finance minister, the late Arun Jaitley had announced that startups that were incorporated after March 31, 2016 could avail a tax holiday for three out of seven years, from the date of incorporation. Startups can avail this exemption provided that annual turnover does not exceed INR 25 Cr in any financial year.
Sitharaman added during her address that over the past year startups have grown in relevance and their contribution to the economy is also growing in significance. The fact that Indian startups raised $42 Bn in calendar 2021 not only underlines the significance of the ecosystem but also tells why startups deserve a greater focus in Union Budget than in earlier years.
Newly-established manufacturing startups and companies will also enjoy an extension on the concessional tax regime of 15%, which was introduced for newly-incorporated domestic manufacturing companies. “I propose to extend the last date for commencement of manufacturing or production under section 115BAB by one year i.e. from 31st March, 2023 to 31st March, 2024,” the FM said.
Further, long term capital gains from non-listed equity shares or units will be subjected to a surcharge cap of 15% as against the graded surcharge up to 37%. This brings parity between the surcharge for long-term capital gains on listed and unlisted equity shares. Besides this, Sitharaman also proposed lowering the income surcharge on members in a consortium to bring it on par with the surcharge on the individual companies, which is 15%.