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Union Budget 2018: Highlights for Investors, Startups and MSMEs

Union Budget 2018 has revealed some policies that impact MSMEs, startups and investors which are highlighted below.
BY Akshay Arora
Feature Writer, BusinessEx
Feb 01,2018

This years budget was not up to the mark as per investors expectations because there was not much about the relaxation of angel tax and will continue to charge at 30 per cent as before.

Saurabh Srivastava, Indian Angel Network co-founder, told ET, "To be honest, we were not expecting anything more than this in this sector because the focus of this Budget was somewhere else. It did recognize the role angels and alternative investment funds play in providing capital for growth and innovation, and to this end, they are being open to further discussion, which is good."

Finance Minister, Arun Jaitley said in his speech, Venture capital funds and angel investors need an innovative, special development and regulatory regime for their growth. We have taken a number of policy decisions, including the launching of the Startup India program building a robust investment.

The budget 2018 was mainly focused on reviving agriculture, education and healthcare industry. The startup industry was not given that much attention this time.

The budget further decodes that Rs.3794 crore will be allocated to MSME sector for credit support, capital and interest subsidy on innovation.

Jaitley also mentioned in his speech, "Mass formalisation of the business of MSMEs is happening after demonetisation and introduction of GST. This is generating an enormous amount of financial information database of MSMEs which will be used for improving the finances of MSMEs and other requirements including working capital."

The budget aims to bring an ease of doing business as well as ease of living, as said by Arun Jaitley during the speech.

Key highlights of Union Budget 2018 for Business/Investors:

  • Budget levies 10 per cent long-term capital gain tax on equity gains of over Rs.1 lakh.
  • Short-term capital gains tax remains the same which is 15 per cent.
  • Capital gains made on shares until Jan 31, 2018 grandfathered.
  • The allocation to Digital India scheme has been doubled to Rs 3,073 crore.
  • 25 per cent of corporate tax rate extended to companies with turnover up to Rs 250 crore.
  • Arun Jaitley proposes to allow 100 per cent tax deduction to companies registered as farmer-producer companies with a turnover of Rs 100 crore.
  • Rural agri markets fund is set for Rs 2,000 crores.
  • Food processing sector growing at 8 pc allocation for food processing ministry being doubled to Rs 1400 crore.
  • India's agri export potential is $100 billion as against current $30 billion exports, says FM.
  • Mass formalisation of MSME sector is happening after demonetisation and GST.
  • The target for loan disbursement under Mudra scheme set at Rs 3 lakh crore for next fiscal.
  • Govt to soon announce scheme to address the issue of Non-Performing Assets.
  • Rs 4.6 lakh crore sanctioned under MUDRA Scheme.
  • Govt's budget for health, education and social security increased to Rs 1.38 lakh crore for 2018-19 from Rs 1.22 lakh crore in current fiscal.
  • The government will launch a flagship National Health Protection Scheme.
  • Govt to focus on health, education social protection. To use technology to improve education from 'blackboard to digital board
  • Economy to grow by 7.2-7.5 per cent in second half of current fiscal, says FM.
  • Introduction of GST has made the indirect tax system simpler.
  • Govt is focusing on ease of doing as well as on ease of living now.
  • Experts said that this is a balanced budget and will help in economic growth.

Expert Speaks on the Union Budget 2018:

Rishabh Vyas, CEO and Founder of Baromeeter said:

We welcome Mr.Arun Jatleys announcement to developbetter regulation for angel investments in the startup sector. It will really help us further while generating funds. However, this budget is mute on a few key issues that have been the paining points for the start-ups such as eradication ofMAT and Angel Investor Tax. We look forward to seeing the details how the government is planning to change the policies to bring relief to startups and the investors."

Sunita Maheswari - Co-Founder StartUp Arena said:

"Union Budget 2018 is a mix of SME's. Increased Wifi connectivity across connects penetration of rural markets which is a good sign.A standard deduction of Rs 40,000 will actually reduce paperwork for companies, eliminates the need for fraudulent claims and expands reach to non-salaried class as well. The budget also talked aboutGovernment financing EPF contribution for new employees. This will reduce manpower costs SMBs who are in the growth mode, and who normally employ first-time job seekers.

Increased outlay on mudra loans, along with easing of requirements for availing the financing under this scheme will go a long way in helping SMBs in getting the most coveted capital.Increased Airport outlay talked will hugely solve connectivity issues which will, in turn, be very beneficial for the SMB and SME's.

The Finance team has tried to do a lot for the poor and the MSME by allocating big funds to schemes like the health schemes, the mudra loan schemes, the agriculture schemes; however what is going to be important is the execution, since that is where the success of the scheme is going to be. Doubling of outlay to the mudra scheme along with easing of complex requirements for availing the loan should go a long way in boosting the startups and SMBs growth story.

Ketan Kapoor, CEO and Co-founder, Mettl said:

We, who form an innovative way to create jobs, are one of the key stakeholders of the Budget of2018. In this era of digitalization, where automation has spread its wings to change the joblandscape, NITI Aayogs initiative to establish a national programme for AI has great expectations.With the vision to digitalize rural India and programs to encourage AI development and easy internetaccess, we see our dream coming true.

For us what really matters is direct and indirect taxation proposed by the government. The plan ofreduction of corporate tax to 25 per cent has been welcomed with great eagerness. The idea of allocating3794crore to MSMEs sector in the form of capital support and interest subsidy may turn out to be a bigbooster in the Indian start-up culture.

I believe that this budget has something good stored in for us; the trick now lies not in the idea butthe implementation. This investment in the digital healthcare system and the start-ups will definitelylead to structuring of our Sapno ka India.

Ravi Saxena, Managing Director, Wonderchef Home Appliances said:

"The welcome budget gives a boost to food processing, infrastructure, healthcare for poor and needy, education and employment opportunities. 5 per cent reduction in corporate tax for MSMEs will boost compliance and investment. Important steps have been taken towards ease of doing business."

Karni S Arha, Chief Financial Officer, Aviva India said:

Provisions announced in the Budget for the MSME sector in terms of lower corporate tax rate at 25 per cent would support their growth and create job opportunities. In overview, the budget is positive with the overall theme of supporting farm sector MSME business, which would generate growth in the overall economy.

Sumit Joshi, Vice Chairman and Managing Director, Philips Lighting India said:

We welcome the union budgets strong focus on inclusive development, with allocations for enhancing both rural and urban infrastructure. It gives a big boost to rural infrastructure by ensuring electricity access to all rural households under the Saubhagya scheme. Additionally, the allocation of Rs 2.04 Lakh crores for developing smart cities will go a long way in creating world-class urban infrastructure.

Sashi Reddi, Founder and Managing Director, SRI Capital said:

I am thrilled that the government continues to make bold and sensible steps. I wanted three things from this budget- Imposition of LTCG tax at 10 per cent, treating non-listed equity on par with listed equity and get rid of the Angel tax. One out of three is still pretty good. Mark my words there will be no big crash in the stock markets. People understand that this was the sensible thing to do.

Conclusion

The Union Budget 2018 was an overall balanced budget that will help in boosting up in the economic growth. The budget is more focused on ease of living this time. It did not divulge anything about angel tax that means it will stay the same as it was. These experts advice says all about the budget and its impact on startups, investors and MSMEs.

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