The Union Finance Ministry has asked startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT) to give a representation before the inter-ministerial board (IMB) for certification so that they can avail recently announced Employees Stock Option Policy (ESOP) tax benefits.
The ESOP tax benefits announced by Union Finance Minister, Nirmala Sitharaman, including deferment of taxes on ESOPs by a period of five years, till the sale of shares or when the employees leave the company has been described as a half-hearted exercise.
Considering that the measure under Section 80-IAC of the Income Tax benefit will only extend to startups incorporated after 2016, registered with the IMB and not to over 20,000 startups registered with DPIIT, the benefit applies to minuscule startups.
“We met startup representatives and asked them to give the representation before the IMB. We will also be following up the matter with IMB,” Sitharaman said in response to a question in a recently held ‘Jan Jan ka Budget’ conference in Bengaluru.
She added that the Budget benefits can only be applied to DPIIT registered startups; however, there is a concern among the representatives that among the 50,000- 60,000 startups, only 21,000 have been registered with the DPIIT.
“The government will have to work on registering more startups with DPIIT, however that doesn’t stop me from extending the tax benefits to already registered ones,” Sitharaman said.
Besides, the e-commerce startups have also made representations before the finance ministry on the rollback of 1% TDS which according to them would add to the burden and put sellers at a disadvantage.
“TCS (tax collected at source) is not an additional tax. We have also asked the e-commerce companies to write to us for a complete justification on why this tax is now levied,” Sitharaman said.
An added burden?
E-commerce startups have made representations before the ministry on the rollback of 1% TDS which according to them would add to the burden and put sellers at a disadvantage.