The Modi government during its first tenure immensely worked on easing business conditions by redefining start-ups and exempting tax liability on startup companies as well as on angel investors. The move has brought positive outcomes in the business ecosystem.
As NDA (National Democratic Alliance) having again come into power, the regime is going to focus on reinforcing its previously initiated programme, Startup India. DPIIT (Department for Promotion of Industry and Internal Trade), which regulates Startup India, has proclaimed to reserve INR 1,000 crore funds for women entrepreneurs. The move has been taken so as to encourage entrepreneurship amid women.
Shoring Up Startup Companies in India
In its first term, the Modi-led government introduced a flagship initiative, Startup India, on 16 January 2016. The platform was primarily launched to uplift the growth of Indian startups and also generate employment in the country.
Apart from the website, the government launched a mobile application as well that facilitates new entrepreneurs in registering their firms. After filling an online form and submitting some documents, start up companies are officially registered on the online platform. Further, the government via Startup India renders funds of up to INR 10,000 crore to the startups and are encouraging banks, as well as financial institutions, to offer financial help to entrepreneurs.
As the problem of angel tax was recently paused, with the income tax department issuing notices to the startups and angel investors to pay 30 per cent of mandatory tax on angel investments, thus, the governments focus got shifted from Startup India. To resolve this issue, the government amended Section 56(2) (viib) and thus, exempted angel tax (30 per cent tax) that was levied on startups and angel investors.
The process was a long one and consequently, affected the progress of Startup India which was slowed down. According to a survey conducted by Local Circles, Only 18 per cent startups and SMEs in the next poll claimed to have benefitted from the Startup India Mission. This means that a huge 82 per cent of startups/SMEs felt that they did not receive any benefit from the highly publicised scheme.
Modifications in Startup India Plan
Following the re-advent of the Modi government, modifications are being made to Startup India. The regulatory body, DPIIT has announced 1/3rd reserve for the women entrepreneurs in Startup India programme.
"We (DPIIT) will ensure that at least one-third of beneficiaries of Start-up India are women. Also, other departments/states will be encouraged to do the same," Ramesh Abhishek, Secretary of DPIIT, has said on Twitter.
Offline and online programmes will be introduced to develop the capability of women entrepreneurs. Further, the female entrepreneurs will be connected with service providers to assist them in legal, financial and tax matters, Abhishek added.
With this reform, the Modi-led government will be consolidating women entrepreneurs in the Indian economy.
Other Reforms to Support the Startup Ecosystem
In order to ensure smooth growth of startups, the re-elected government is introducing new ways to ease tax liabilities. In the first term, the government had proclaimed 100 per cent Income tax deductions for the companies, which fulfils the following conditions:
1. The company has a turnover of less than INR 25 crore.
2. The company innovates and develops new products.
The companies, which abide these conditions, are eligible to receive 100 per cent tax deductions. Till now, only 100 companies have been able to avail this benefit, as reported by the Indian daily newspaper, The Economic Times.
The abovementioned report also states that similar to encouraging women-centric startups, the re-elected government is trying to ease tax norms for the startup companies as more firms can be benefitted from 100 per cent tax deduction scheme.
These moves allude that the government is actively working to enhance the startup ecosystem in the country. In the coming times, it is yet to see how the government implements the new reforms in Startup India and bring ease to the startups.