Union Budget 2020-21: Start-ups seek tax Rejig, focused funds

Another demand that arose was for a 'fair taxation policy' for start-ups, especially the Employee Stock Ownership Plan (ESOP).

Published: 28th December 2019 11:39 AM  |   Last Updated: 28th December 2019 11:39 AM   |  A+A-


Budget (Express Illustration)

By Express News Service

With the Indian economy facing a general slowdown, businesses have hope pinned on the upcoming Union Budget 2020-21, which they expect would have measures to promote entrepreneurship further.

Amongst the voices are start-ups, urging the Centre to improve ease of setting up businesses in the country, faster processing of Tax Deducted at Source and Goods and Services Tax (GST) refunds, and more rationalisation of taxation.

Union Finance Minister Nirmala Sitharaman, who held a series of pre-Budget consultations with various stakeholders, have met heads of several start-ups, venture capitalists and techies, seeking inputs on improving the start-up ecosystem.

The issues that dominated these discussions included digital infrastructure and the role of government; regulation of the digital economy, especially in areas such as privacy; financial regulations; ease of doing business environment for start-ups; infrastructure gaps for digital India and taxation.

“Among the suggestions, was a proposal that start-ups with below Rs 10 crore turnover be exempt from GST under the reverse charge mechanism. It was suggested that a single GST registration that works across states should be created,” said a senior finance ministry official.

Another demand that arose was for a “fair taxation policy” for start-ups, especially the Employee Stock Ownership Plan (ESOP).

“The tax collection point should be deferred. Taxation comes into play when ESOPs are exercised. We have sought that they are taxed only during the sale, in order to make such ESOPs attractive. The government should collect tax when an employee sells it, not when s/he exercises it. Currently, this is a major dampener,” said Ashish Aggarwal, senior director and head of public policy, National Association of Software and Services Companies (NASSCOM).

NASSCOM also urged that the Centre have a dedicated fund for tech start-ups. “For the deep tech start-up ecosystem, we need to attract capital. To enable that, the government should consider setting up a fund for deep technology-focused areas,” Aggarwal said.

Currently, a majority (85 per cent) of funds are from outside India. The government should increase local funding so that the control remains in India.


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