Budget 2019 Highlights for Startup Development

Budget 2019 Highlights for Startup Development

Budget 2019 Highlights for Startup Development


Highlights for Startups:

The Finance Ministry has announced in Budget 2019;

  • Relief for startups as Government eases Angel Tax regulations

  • Nirmala Sitharaman had announced an exclusive TV channel for startups

Government simplifies the Angel Tax regulations for Startups:

The Finance Minister Nirmala Sitharaman had made her maiden budget of the Modi 2.0 Government in the Lok Sabha on July 5, 2019, in the Parliament.

Sitharaman stated that Startups in India are taking firm roots and their continued growth requires being encouraged. With the intention of resolving the ‘Angel Tax’ issue, startups, as well as their investors who file necessary declarations along with providing information in their returns, would not be subjected towards any kind of scrutiny regarding valuations of share premiums. The concern of creating the identity of the investor and source of his funds is going to be resolved by means of putting in place a mechanism of e-verification. Through this, funds raised by startups would not require any kind of scrutiny from the Income Tax Department

Special administrative arrangements shall be made through the Central Board of Direct Taxes (CBDT) for pending assessments of startups as well as redressal of their complaints. It may ensure that no inquiry or verification in such cases is carried out by the Assessing Officer without getting an approval of his supervisory officer.

Section 56 of the Income Tax Act, which is also recognized as the Angel Tax provision, was a contentious concern for the startup ecosystem. The section was applied by the tax department to probe startups to pay tax on angel investment. Numerous startups who had raised funds also received demand notices from the CBDT. Though the clause doesn’t apply to startups receiving funds from registered venture capital investors and AIF–I category, the industry wanted the scope of the exemption being expanded. 

Sitharaman in her budget 2019 speech stated that presently startups are not required to justify the fair market value of their shares issued towards certain investors which includes Category-I Alternative Investment Funds (AIF). She had proposed to extend this benefit to Category-II Alternative Investment Funds also. Thus, the valuation of shares issued near these funds will be beyond the scope of income tax scrutiny.

In the budget 2019, FM also proposed measures towards carrying forward and set off losses for startups and upsurge in-period of exemption of capital gains from the sale of residential house for investment in startups up to March 2021.

Finance Minister announced an exclusive TV channel for startups:

Finance Minister Nirmala Sitharaman during the Budget 2019 speech had proposed starting an exclusive TV channel for startups. The government would start the startup-focused channel under the Doordarshan umbrella, and it shall be managed by startups themselves. The channel would also assist in matching startups with venture funds and investors.

Click here to know more about MSME Highlights of Budget 2019



eStartIndia Team

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