Budget 2021: A few hits, many misses for tech sector, startups

Although the Finance Minister's claim of providing a big boost to startups by extending the tax holidays till March 31, 2022 is seen as a move that helps, the announcement came with a rider.

Published: 01st February 2021 08:39 PM  |   Last Updated: 01st February 2021 08:48 PM   |  A+A-


For representational purpose.

Express News Service

BENGALURU: The Union Budget 2020-21 scored a few hits but had many misses as far as India's IT/ITES industry and startup sectors were concerned. 

The Modi government's digital-first approach -- right from the Rs 50,000 crore allocation for R&D to the digital census was appreciated by tech industry leaders. But they felt their expectations that there will be more policy-related clarity on companies working out of Special Economic Zones(SEZs), and tax rebates and employee-related measures were not met.

Although Finance Minister Nirmala Sitharaman's claim of providing a big boost to startups by extending the tax holidays till March 31, 2022 is seen as a move that helps, the announcement came with a rider that only those firms registered with the Inter Ministerial Board(IMB) will be able to claim the benefit.

Ashish Agarwal, Head, Public policy, Nasscom told The New Indian Express that only 400 start-ups, out of 4000 registered with DPIIT, will be able to avail the tax holiday benefit. Besides, the concern of tax benefits of Employee Stock option plan (ESOPS), pertaining to the exemption of taxes till the stocks are vested, remained unaddressed. 

However, registration of one-person companies with no restrictions on paid-up capital and turnover as well as easing the compliance burden for NRIs are seen as positive moves for the startup ecosystem. 

Serial Entrepreneur and Promoter, Big Basket, K Ganesh said that by including companies that have a capital base up to Rs 2 crore in the category of small companies, raising the current limit Rs 50 lakh and under, will provide compliance benefits to over 2 lakh companies. 

Limited Liability Partnerships are now decriminalized and there is a flexibility to convert a company to any form or LLP is going to increase the ease of starting business. However, according to Ganesh the budget should have made a strong push for Government making purchases from Indian startups. This would have helped attain the atmanirbar India goals, drive employment in the startup sector and created a greater demand for indigenous startups. 

The Finance minister's announcement of setting up a world class fintech hub as well as allocating Rs 1,500 crore for digital payments was a reason for cheer especially since UPI transactions have crossed 2 billion a month mark during the pandemic.

"I'm hoping the funds will be used towards developing alternatives to Zero MDR policy and initiatives towards bringing digital financial literacy in vernacular languages. These will instil trust in the system and accelerate adoption from MSMEs and entrepreneurs who are apprehensive towards moving money digitally," Harshil Mathur, CEO & Co-founder of Razorpay, said.


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