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Boost for Start Up Ecosystem

With a quantum of budget allocation on data and exemptions on startups tax slabs, Budget proposals have opened doors for new age entrepreneurs to thrive in India

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The Union Budget for 2020-21 has opened more vistas for a vibrant and dynamic economy as it focuses on further encouraging the Start Up ecosystem in India. Emphasising on startup, Sitharaman said, “Entrepreneurship has always been the strength of India.” With the announcement of Investment Clearance Cell portal, she said that these will provide ‘end-to-end’ facilitation and support, including pre-investment advisory and information related to land banks and facilitate clearance at Centre and State level.


 On this, a digital technology company To The New’s CEO Deepak Mittal, said “The government’s move to set up an Investment Clearance Cell for entrepreneurs to offer assistance in funding, will certainly encourage more start-ups to set up their businesses in India. This will, in turn, lead to the growth of the Indian economy. With a slew of growth measures announced, the emphasis of the government is very clear on the overall economic development."


Sitharaman also said that “Data is the new oil,” and highlighted the role of analytics, fintech and Internet of Things (IoT). She said the policy on Data Centre Parks which will be introduced throughout the country soon. She also announced the laying of Fibre to the Home (FTTH) connections through Bharatnet that will link 100,000 gram panchayats this year. Ayush Goyal, CEO & Founder, ExpertRight.com said, “The major reforms for startups working in tier 4 cities will be the announcement for the advancement of 1 lakh Panchayats by connecting them to fiber net and also opening data parks across India. Startups struggling to work across the villages in the absence of basic internet and phone facilities will surely get benefit from this reform.”


Sitharaman also proposed government’s plan to provide early life funding, including a seed fund to support ideation and development of early stage start-ups. She said, “Quantum technology is opening up new frontiers in computing, communications, cyber security with wide-spread applications. It is expected that lots of commercial applications would emerge from theoretical constructs which are developing in this area.”  


She also proposed allocation of Rs 8,000 crore over a period five years for the National Mission on Quantum Technologies and Applications. Highlighting the usage of Employee Stock Option Plan (ESOP) by startups to attract and retain highly talented employees, she proposed to ease the burden of taxation on the employees by deferring the tax payment by five years or till the employees leave the organisation or if they sell their shares. 


Easing startup’s tax filing, she informed that startups with turnover upto 25 crores will now receive an exemption of 100 per cent of its the profits for three consecutive assessment years out of seven years if the total turnover does not exceed Rs 25 crore.  She added, “In order to extend this benefit to larger startups, I propose to increase the turnover limit from existing ` 25 crore to 100 crores. Moreover, considering the fact that in the initial years, a start-up may not have adequate profit to avail this deduction, I propose to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years, informed FM.


 On this Shubh Bansal, Co-Founder, Truebil said, “As the Finance Minister proposes to ease the tax burden of ESOP on employees by deferring the tax payment by 5 years, I am positive about this move and welcome the introduction of ESOP at a larger level. I hope this would result in attracting world-class talent while keeping employee costs in check. As sovereign funds have been an important funding source for startups in India, I am happy that there has been an exemption of 100% for these funds on interest payments. I believe this move will further attract more foreign funding into the startup ecosystem. Overall, we believe that this is going to give a boost to the entire startup ecosystem as the Union Budget 2020 proposes slew measures to ensure ease of doing business for Indian startups, including seed fund to support early-stage startups and investment clearance and advisory cell for entrepreneurs.”


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