Angel Tax: Start-ups disappointed by Budget 2019

Angel Tax: Start-ups disappointed by Budget 2019

Though the interim finance minister Piyush Goyal mentioned 'start-ups' in his speech quite a few times, there was no major announcement for the ecosystem.

Start-up ecosystem, which hoped to see a positive action on the issue of Angel Tax, is disappointed by the interim budget. In fact, overall the budget did not have much in store for the start-ups. Though the interim finance minister Piyush Goyal mentioned 'start-ups' in his speech quite a few times, there was no major announcement for the ecosystem.

"We were looking for something on Angel Tax to be addressed in the budget because it is a huge issue," Padmaja Ruparel, President, Indian Angel Network told Business Today.

"This devil is still in the system," she said.

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However, Ruparel hopes that round-table meeting called by the Department of Industrial Policy and Promotion, on February 4, to discuss angel tax with start-ups will give some clarity on the issue.

Karan Mohla, Executive Director, Chiratae Ventures India Advisors too said that no mention about Angel Tax was a big disappointment. "Don't think anybody was expecting any big thing other than some clarity on the angel tax issue. People were genuinely expecting something to come out," he added.

Start-up industry for a while has been demanding government to abolish the Angel Tax. The issue gained up heat after some start-ups received notices to pay angel tax.

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According to Mohla, there was also an expectation that the government would remove the duties on electric vehicles. However, no such move was announced and this too was a let-down for the start-up community. "A lot of people are doing things on it. And the reason it has taken much longer to get commercial viability is because there is either a lack of subsidy or lack infrastructure or an overall push by the government," he added.

Besides this, the budget did not have much in bag for the start-up community. However, several other measures introduced would impact the space indirectly. Here are some of them:

  • The finance minister announced that soon, businesses comprising over 90 per cent of GST payers will be allowed to file quarterly return. This could have implications for the start-up community. "It was a huge issue for every start-up and this will definitely help," said Mohla.
  • The government also announced that single window clearance for ease of shooting films, available only to foreigners, will now be made available to Indian filmmakers as well. According to Mohla, this could benefit start-ups that focus on digital entertainment. "This will ensure that start-ups, which want to create either some sort of production or short form regional content don't have to go through the bureaucracy," he added.
  • "Focus on AI and space is opening up new arenas, which hopefully will create opportunities for start-ups to go and create something completely different," says Ruparel. Government announced a National Programme on 'Artificial Intelligence' in the budget. It also introduced a space programme-- Gaganyaan.
  • The government also announced "Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)" programme, under which, vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year. Besides this, the government announced other subsidies for the farmers. Mohla says this will benefit agri-businesses and agri-tech start-ups as it would put more money in the hand of farmers.

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The tax rebates announced by the government would also indirectly impact start-ups as it will put more money in the hands of common man, says Amarjeet Singh, Partner at KPMG.

However, he was also of the opinion that more needs to be done for the start-up space.

"DIPP on its own, which is running this programme, is handicapped. Whatever announcement they have to make or whatever they want to do, it will have a connect with some other ministry and that is where things start falling apart," he says.

"For start-ups, you should have an act like SEZ Act, which overrides every other provision or law," he adds.

He also adds that the availability of domestic money has to be increased for the start-ups.

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