BUDGET 2016 - PRO START-UPS

Start-up India movement, launched by PM Narendra Modi this January has been one of the most visible campaigns initiated by the Government of India to encourage entrepreneurs. This plan aims to provide a conducive environment for new startups, create job opportunities and build the economy. The finance Minister, Arun Jaitley reflected the same plan of action in his speech for Union Budget 2016-17 presented today.

Tax Holiday for Start-ups:

A 100% deduction of profits for 3 years for start-ups has been announced by the finance minister in his budget speech. This will in return encourage economic growth and employment. In a similar step to promote innovation, a special copyright policy will be launched with a 10% rate of tax on income from worldwide, the minister said.

Project MUDRA:

The Pradhan Mantri Mudra Yojana which was started for the benefit of budding entrepreneurs also got a fillip this year. Banks and NBFCs listing an amount of Rs 1 lakh crore covering 2.5 crore borrowers have been made in the budget. In the coming year, Arun Jaitley says the plan is to increase the target to Rs. 1.8 lakh crore.

Rs 500 Cr for the women entrepreneurs:

The Finance Minister also announced that the government will associate with Dalit Indian Chamber of Commerce and Industry (DICCI) to set up entrepreneurial centres for business people from the backward classes by allocating Rs 500 crore for its Stand-Up India scheme. The move is expected to benefit nearly 2.5 lakh entrepreneurs.

Register a Start-up in One day:

The Finance Minister reiterated that all the provisions initially spelled in the Start-up India action plan will be enabled for the registration of a company in one day through a mobile app. Since currently it takes between 15 and 30 days for a company to get incorporated, this proposal would be a big boost for aspiring entrepreneurs.

Capital Gains and ARCs:

For the Start-up ventures, the Long Term Capital Gains Tax has been the ground of much discussion. While listed companies do not draw LTCG exceeding a holding period of 12 months, unlisted companies attract 20% till a closing time of 3 years. This holding period, however, has now been reduced to two years to get benefits of LTCG in the case of unlisted companies.

To achieve more investment in Asset Reconstruction Companies (ARCs), a complete pass through income-tax to securitization including trusts of ARCs has been proposed. The income will be taxed in the hands of the investors rather than the trust.

Corporate tax for Small firms:

As per the Union Budget 2016-17, new manufacturing companies which are incorporated on or after 1st March ‘16 are aimed to be provided an alternative to being taxed at 25 percent plus surcharge and cess fitted they do not claim profit linked or investment-linked deductions. Also, which do not avail of investment interest and accelerated reduction. The companies with turnover less than Rs 5 crores are proposed to be lowered to 29 percent plus surcharge and cess.

Making new Entrepreneurs:

In another important move to take Startup India initiative ahead, Finance minister announced online courses on entrepreneurial training which will enable access to mentors and credit for young entrepreneurs.