Kick to Startup India initiative

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Kick to Startup India initiative!
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• The economy of any country depends on quality of
  its people. Larger the number of employed people,
  better will be the economy. The importance of
  promoting entrepreneurs has been recognised by
  the Indian Government. 'Startup India, Stand up
  India' is one such campaign for creating a
  conducive environment for ??startups in India. It
  aims to boost entrepreneurship, encourage
  startups with job creation and building an
  economy driven by technology.
• For empowering startups to grow through
  innovation and technology, the Indian Government
  announced startup India Action Plan plan which
  addresses all aspects of the startup eco-system.
  The plan proposes a 19 point action list which
  inter-alia includes compliance regime based on
  self-certification, startup India hub, rollout of
  mobile app and portal, legal support and
  fast-tracking patent examination at lower cost,
  faster exits, funding support through a 'funds of
  funds' with a corpus of INR 10,000 crore, etc. It
  also proposes to provide tax exemptions on
  profits, capital gains, and investment above fair
  market value subject to fulfillment of certain
  conditions. The objective to give these
  exemptions is to promote investments into/growth
  of startups and address the working capital
  requirements.
• Recently, the Government has issued a
  notification wherein the term 'startup' has been
  defined and the procedure for its recognition and
  obtaining tax benefits has been prescribed.

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• The ??Union Budget 2016 is well aligned with the
  startup India campaign. In line with the plan,
  the Budget proposes the following initiatives for
  startups
• Amendment in the Companies Act, 2013 to improve
  enabling environment for startups and ensure
  registrations of companies in one day.
• Hub to support Scheduled Caste SC and
  Scheduled Tribe ST entrepreneurs. Further, INR
  500 crore has been earmarked for SC/ST and women
  entrepreneurs under the Startup India scheme.
• Entrepreneurship education and training to be
  provided through Massive Open Online Courses so
  that they can connect to mentors and credit
  markets.
• With a view to provide an impetus to start-ups
  and facilitate their growth in the initial phase
  of their business, in line with the plan and
  notification issued by the Government, effective
  from assessment year 2017-18, the following tax
  exemptions and incentives have also been
  proposed
• Section 80-IAC to be inserted to provide 100
  deduction of profits derived by a eligible
  startup engaged in eligible business, subject to
  fulfilment of certain conditions. The proposed
  deduction will be available at the option of the
  assessee for any 3 consecutive assessment years
  out of 5 years beginning from the year in which
  the eligible start-up is incorporated. Eligible
  start-up means a company which is incorporated on
  or after 1 April 2016 but before 1 April 2019
  the total turnover of its business does not
  exceed INR 25 crore in any of the financial years
  beginning on or after 1 April 2016 and ending on
  31 March 2021 and it holds a certificate of
  eligible business from the Inter-Ministerial
  Board of Certification as notified in the
  Official Gazette by the Central Government.
  Eligible business for the purpose of claiming the
  above tax deduction means a business which
  involves innovation, development, deployment or
  commercialisation of new products, processes or
  services driven by technology or intellectual
  property.

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• However, no exemption have been given from
  payment of Minimum Alternate Tax MATand
  startups will have to pay MAT _at_ 18.5 plus
  applicable surcharge and cess on their book
  profit. Thus, there is no complete tax holiday
  for startups. The Finance Minister may consider
  giving exemption to startups from payment of MAT
  to give boost in true sense. Also, in the initial
  5 years, the startups may not make much profits
  and hence the period of 5 years may be extended
  to 7 to 8 years.
• Exemption from capital gains tax would be
  available if long term capital gains LTCG are
  invested in units of a specified fund, as may be
  notified by Central Government, upto a maximum
  investment of INR 50 lakhs. The exemption will be
  available only if amount remains invested in such
  units for three years.
• LTCG arising on account of transfer of a
  residential property shall not be charged to tax
  if such capital gains are invested in
  subscription of shares of an eligible start-up.
  The exemption would be available if such
  individual holds more than 50 share capital or
  voting rights after the subscription in shares
  and such company utilizes the amount invested in
  shares to purchase new assets before the due date
  of filing of return by the investor.
•  Domestic companies with turnover not exceeding
  INR 5 crore in the previous year 2014-15 will be
  taxed at 29 plus surcharge and cess.

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• Also with a view to promote entrepreneurship and
  make in India objective of Government, Finance
  Minister proposes to tax newly set-up domestic
  manufacturing companies incorporated on or after
  March 1, 2016 at 25 plus surcharge and cess
  provided they do not claim any profit-linked
  incentives, investment-linked incentives,
  accelerated depreciation, investment allowance,
  expenditure on scientific research and certain
  deductions covered under Chapter VI-A.
• The Budget suggests that the Government is
  clearly focusing on growth, development, job
  creation by formulating various schemes and
  measures for startups and entrepreneurs in India.
  At the same time, it has been ensured that only
  deserving enterprise get to reap the benefits of
  such schemes. Tax incentives such as complete tax
  deduction of profits for 3 years and relaxation
  in capital gains tax in specified cases is a
  positive step. This will boost the investment in
  startups. However, there may be some concerns in
  relation to eligibility criteria for startup,
  profit in initial years, MAT, etc.
• Further, simpler regulation regime shall enable
  the startups to focus on their core business and
  keep compliance cost low. The government efforts
  to provide skill development and training to
  youth along with implementation of digital
  literacy will lift up the startup eco-system. The
  move of government will certainly create positive
  waves and will go a long way to deal with the
  problem of unemployment, and be an effective
  instrument for India's transformation.
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