Budget 2017 would be a big benefit for startups, says Sreedhar Prasad

India Infoline News Service | Mumbai | February 03, 2017 13:35 IST

For start-ups, the condition of continuous holding of 51% of voting rights has been relaxed. Now, if the shareholders having voting rights continue to hold those shares, the Start-ups will be eligible to carry forward those losses.

The Government gave income tax exemptions to start-ups with certain conditions last year. For the purpose of carry forward of losses in respect of such start-ups, the condition of continuous holding of 51% of voting rights has been relaxed subject to the condition that the holding of the original promoter/promoters continues.
 
For start-ups, the condition of continuous holding of 51% of voting rights has been relaxed. Now, if the shareholders having voting rights continues to hold those shares, the Start-ups will be eligible to carry forward those losses. In other words, fresh infusion of funds will not obviate start-ups from carry forward of losses. This will be significant advantage to Start-ups which are likely to be profitable in say 4 to 5 years’ time frame as this will reduce their tax burden.
 
The profit linked deduction available to the start-ups for 3 years out of 5 years is being changed to 3 years out of 7 years.
 
This would be a big benefit for startups since they can choose which all consecutive 3 years they can avail tax exemption within a wider time frame of 7 years based on their assessment of the business in the future.  Many startups in Technology products, Pharma & Healthcare, Consumer products, Education and B2B online businesses would benefit considerably through this reform since they would have a higher chance of being profitable within the period specified.
 
The Government is targeting Rs 2500 Crore worth of digital transactions by FY18. Towards this, they are encouraging rollout of 20 lakh Aadhar based PoS machines and another 1- lakh additional POS terminals through banks over the coming few months. To enable access to digital services at low tariffs and increase the adoption of BHIM app for mobile payments, Government also announced Rs 10,000 Cr allocation for Bharatnet for providing high speed broadband to 1.5 lakh gram panchayats, supplemented by removal of all duties on devices – such as PoS machine, fingerprint reader etc. – used in cashless transactions.
 
Given the clarity on digitization of transactions, businesses will continue their efforts on enabling cashless transactions on their offline and online channels. These initiatives will not only increase the fraction of cashless transactions from current consumers, but also serve as a catalyst for onboarding new ones. Bill payment for utilities as well as services such as telecommunication, dish TV and others will be among the early beneficiaries of this initiative. Overall transparency in the system will rise on account of the digital trail and over time, the transactions will also become more secure.
 
Sreedhar Prasad, Partner, E-Commerce and Start-UPs, KPMG in India.
 

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