The government has done well to exempt capital gains tax that often force start-ups to shift their registered office outside India. The government was earning pittance, if at all, from the capital gains tax and it served no purpose to carry this on. The move will bring Indian start-ups closer to the levels prevalent for listed companies. The impetus for the Pradhan Mantri Mudra Scheme would also help in working capital requirement working capital requirement of small start-ups.
Even after these measures, start-ups will still have to grapple with funding pangs. Every entity doesn't have access to venture capital or angel funding. Opening a channel of banking loan to them could have provided a much-needed respite to end their funding woes. The Budget also did not provide details on creation of a Rs 10,000-crore fund for startups on how the fund will be disbursed to reach the startups. There is a need for a lot of groundwork to be done on this so that the scheme does not remain on paper only.
Startups also expected simplification of tax regime in the Budget. Filings like MCA filings, service tax returns, TDS returns, turn out to be unnecessary burden on them. This proposal also left out in the Budget.
Removal of angel tax also escaped Finance Minister's notice. The abolition of this tax would have induced individual investors to invest in startups and thus help startups explore funding from individuals. VC funds were looking out for exemptions in taxation on angel investments.