In the Startup India Action Plan, the three-year tax holiday proposed for startups will be available over a five-year window. Experts believe that innovators would not lose on the benefit even if they make a profit later. As the Union Budget is around the corner, the Finance Minister Arun Jaitley has invited suggestions from the Startup leaders to enhance tax structure for the better business ecosystem.
"You may like to send your suggestions for changes in the duty structure, rates and broadening of the tax base on both direct and indirect taxes giving the economic justification for the same," he said in a communication to the industry bodies.
Supportbiz has listed some of the key suggestions from the startup leaders for better tax structure:
Widen Tax base
Kulpreet Kaur, Co-founder, Shop Pirate Coupons believes that with a population of a billion+, Indian has only 4 crore tax payers which create a sense of unfairness among those who pay their taxes, as this tends to increase the income tax rate. Therefore, Kaur said that the Government has been looking into this primary concern of widening the tax net and reducing the burden on current taxpayers. He expects that the Budget should address widening the tax net and more people should be brought within the tax net.
Simplification of Tax Laws
Mukesh Singh, Founder & CEO, ZopNow also believes that simplification of tax laws for startups operating in e-commerce, tax incentives for employees working in small scale enterprises - including startup, policy framework on supporting startups trying to list themselves with an IPO, would be some of the things he is looking forward to in Budget 2016.
Service Tax Relief
Sidharth Gupta, Co-founder, Treebo Hotels is keen to see service tax relief offered to early stage start-ups. He believes that “most young companies are not profitable for the first few years, service tax and not income tax tends to be a large burden on their financials.” Gupta also hopes that government would take cognizance of this and offer part or full relaxation for the early years which will benefit early stage startup to boost in business.
Likewise, Sidharth Akhil Gupta, CEO and Founder, Bumper also believes that waiving off service tax for a period of three years will give a huge relief to Bootstrapping startups. Scrapping unnecessary paperwork and a fast track documentation process will help save precious time of an entrepreneur, allowing him to expend his energies on the right things.
Uniform Tax structure/GST to implement
ZopNow’s Singh is eagerly waiting for a uniform tax structure that GST was expected to bring in. GST will freeze all other diverse tax policies as per state. Therefore, it will benefit the startups in ease of doing business.
Startup friendly Tax regime
Bumper’s Gupta believes that “a start-up friendly tax regime, minimum interference, easy access to capital and reduced bureaucracy are some of the key factors that can drive the startups into the new era of entrepreneurship.” Thus, Akhil believes that Government should ease the qualification of Angel money which is often the lifeline for entrepreneurs. Tax breaks and the introduction of incentives to individual investors and to early stage startups will pave the way for a new breed of fearless entrepreneurs. Angel investors should provide incentives and given a tax benefit. “The 2016 budget will be the one keenly followed by the startup community and we can only hope it ushers in a new era of entrepreneurship, stated Gupta.
Suman Howlader, CEO & Founder, CarZippi sadded, " As a startup our expectation is to have a startup-friendly tax structure for new ventures that is, slab based tax structure and Service Tax exemption ceiling to be increased.
Relief from direct and indirect tax
Pushkar Singh, Founder, LetsTransport believes that the removal of direct and indirect taxes would also enable faster growth of companies. He stated, “Investments in early stage start-ups involves risk and, therefore, it is important to set reasonable baseline tax rates for investors, to attract more funding on reasonable terms.”
Shatomita Ghosh, founder, SponsorSource Brandonomyalso believes that the startups should be exempted from direct and indirect taxes, including minimum alternative tax to have the relief from the compliance burden and cash outflows
Tax exemption for startups
Ghosh said, “The policy regulations like the ease of compliance, tax exemptions for startups are much needed as the entrepreneurs should only concentrate on building their ideas into businesses.”Ghosh believes that angel money is the source of capital for the startups, the removal of angel tax on the capital gain is needed.
She added that the states, imposing taxes on e-commerce transactions, thereby creating barriers to technology adoptions. This should be stopped as e-commerce is a means to transact online, resulting into transparency.
NPS (National Pension Scheme) Withdrawal Tax Removal
Kaur of Shop Pirate Coupons believes that while deductions or exemptions are provided for subscribers when making investments and accumulations, there is taxation for any withdrawal from the NPS. He also suggested that for a wider participation in NPS and to boost savings, the government should exempt withdrawals from taxation.
Picture courtesy: Matt Aiello (freeimages)