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Last updated: February 17, 2016 at 17:31 pm

Union Budget 2016: Expectations from Indian Startups

Indian Startup Budget Expectations

Unveiling of Union Budget is one such event that is keenly followed by Business Owners, be it small or large. The announcements made during budget shape the financial decisions of many!

With the launch of the ‘Start-Up India Campaign’ and a lot of focus on encouraging start-ups, curiosity has been built around what the budget will offer. How well the government will adopt and accommodate start-up friendly policies and initiatives.

Here are a few quotes from Founders of Startups on their Budget Expectations.

Mr. Sujayath Ali, CEO & Founder, Voonik.com

1. Reward Diversity in Startup workforce: Many startups are preferred places for women, as they get flexible timing, work from home and other benefits. Startups give women a great opportunity to fulfill their personal commitments without compromising success at professional front. I feel, government should encourage diversity, by giving certain tax benefits to encourage inclusion of women in startup workforce.

2. FDI in B2C Ecommerce: Currently there is a lot of confusion in terms of what constitutes B2C ecommerce vs. marketplace and where FDI is allowed. We expect clarity on FDI policy and definition of what entails a marketplace.

3. Removal of Angel / Startup Tax: We are awaiting clarity on the angel tax. While Finance Minister mentioned that provisions will made in the Income Tax Act for exemption to a notified class of investors, we are still awaiting details.

4. Staggered/Laddered Service tax: Even though a 3 year Income tax holiday is given to new startups, the issue of Service tax is not addressed yet. I hope in the new budget, some laddering like that of Income tax slabs is given to startups. This will help us in being able to invest a part of our revenues to business, reduce our dependence on VC funds and once we reach a certain stature we can definitely pay ST at par with other Listed companies.

5. Infrastructure: To make Ecommerce sector profitable, we need a robust delivery system. All ecommerce companies are struggling with delivery delays, package losses in transit etc. For customers, getting their order in time is the bare minimum expectation. On the other hand, for a company to deliver on time through polite courier boys, is a big challenge. Often many courier partners are not equipped to handle cash collected in delivery. In the new Budget, there has to be a more focused plan on improving road & rail infrastructure, so that companies like Voonik can profitably deliver the orders to our customers.

6. Financial innovation for easy credits to SME & small traders: One of the key challenge for our sellers face is the liquidity crunch when they have to suddenly scale up to cater to a huge online demand. I feel, the new budget should encourage NBFCs to create fast, easy and reasonable loans for the sellers who start selling through online retail.

7. Mobile Money: If in the new budget, government can announce rebates/ subsidies through Mobile money platforms, this will help us in encouraging prepaid order placing, thus reducing our cash on delivery handling costs.

Ashish Bhatia – Founder & CEO, Labsadvisor.com

Service tax threshold should be raised significantly: In the Start-up India initiative by the Modi government, start-ups are getting corporate tax exemption for the first three years. However, for most start-ups SERVICE TAX is a bigger concern as it is charged on the revenue or turnover rather than the profit. Companies also have to bear the burden of paying service tax on services that they buy from outside e.g. advertising, web development etc. Service tax raises the cost of doing business significantly. Doing away with the service tax during the first 2-3 years will help vastly and let many more start-ups survive.

TDS deduction should not apply: TDS on employee salaries and contractor payments puts a significant regulatory burden on start-ups. Instead of focusing on operations, the company management has to focus on collecting tax saving documents, deducting and depositing tax, and finally filing the returns. This is not only time consuming but also leads to unnecessary payments to outside agencies like CAs.

Redundancy pay should be tax exemptStart-ups make mistakes in hiring or have to let go of people due to investment delays. When a company lets go of its employee, generally some redundancy payment is made. This payment should be tax exempt in the hands of the employees. This practice is being followed in UK. Redundancy pay of up to 3 months is tax exempt. This incentive will be very helpful for redundant employees when they are on the lookout for another job.

Mr Kiran Murthi, CEO, AskmeBazaar.com

The roll out of excellent initiatives like Start up India and Digital India by the Indian government is a

step in the right direction as it strives to create a promising environment for budding entrepreneurs. We are hopeful that such campaigns will convert to strong economic growth and increase in overall consumption. We hope that the government will continue giving thrust to various reforms in this sector in the forthcoming Union Budget 2016-17.

As a leading e-commerce brand, with a proud association with millions of SMEs across India, we hope the government will present a futuristic tax policy that will address the complications of the current tax structure. We hope that the GST roadmap will be shared in the budget for FY 2016-17.

Finally we look forward to an ecosystem devoid of red-tapism, paving the way for greater ease in doing business and creating the ground for ‘Innovation’ & ‘Entrepreneurship’.

Sashank Rishyasringa and Gaurav Hinduja, Co-Founder, Capital Float

The Prime Minister’s action plan on startups was the first step to aid the growth of the entrepreneurial ecosystem in India. We hope that the budget will lay the groundwork to create more opportunities for innovation in the startup sector especially in the Fintech space. We expect this Budget to bring parity between the NBFCs and other financial institutions and kick-start the SARFAESI measures, which has been the long standing demand of the NBFCs thereby bringing the regulatory framework in parity with banks.

We believe that this budget would also look at providing monetary incentives under Skill India to small-scale entrepreneurs to help them impart specific training to unskilled labour and a flush of capital into the Technology Acquisition and Development Fund (TADF), meant to help business to acquire the requisite machinery and technology to expand their operations. Incremental steps promised in the Startup India initiative by the Prime Minister will need to become a reality which can in turn set the stage for something big, bold and a game-changer.

Rajiv Kumar, Founder & CEO of StoreHippo.com

We expect the government to simplify tax regime for startups to foster innovation and create conducive ecosystem for entrepreneurs in the country. As a startup, we welcome the move by PM Modi to offer 3 years of tax exemption under the Start-Up India action plan; but more than exemption on Income tax, the statutory and regulatory compliances related to various filings like Service Tax returns, MCA filings, TDS returns and various state specific compliances should be simplified as the filing of these documents consumes a lot of time and bogs down a startup.

We expect the Govt. to introduce e-commerce and startup friendly initiatives that will boost the e-commerce industry. Exemption of the angel tax (that taxes the capital receipts) will help the startup industry, especially when financing from banks and VCs is unavailable. Even the tax rates for the investors should be rationalized, as they also take a risk by investing in startups. Favorable policy regulations like ease of compliance and tax exemptions will boost the sector and contribute to favourable growth of the economy. 

A Dedicated Corpus of Funds announced by the government under Startup India action plan will definitely help entrepreneurs and startups, as many players struggle with funds in the initial stages. However, the Govt. must make sure that the funds are judiciously allocated so that there is uniform distribution across different industry sectors. Also, there should be limit on funds allocated to one startup.

The ‘Startup India, Standup India’ campaign has created excitement and raised hopes for the startups and entrepreneurs. We hope that the budget will lay down a clear roadmap on the execution of all the policies announced.

Varun Dua, CEO & co-founder – Coverfox.com

“The key expectations from Budget 2016 is deregulation and allowing FDI in fin-tech. Most fin-tech businesses like payment banks / insurance have heavy dependence on domestic capital which is mostly risk averse and thus scarce.

The Budget should also  consider relaxation in structures which make private secondary transactions more liquid from a tax or complication perspective.” –

Pankaj Vermani, CEO, Clovia.com

“The E-commerce industry has seen a boom in 2015. To ensure that the growth continues the Union budget needs to provide greater tax clarity especially related to jurisdiction / taxability issues. We are also hoping for a positive clarification for the Central Sales tax on transactions such as cash on delivery, which involve inter-state movement of goods.In addition, today every region has different laws for eCommerce. To govern the sector better one needs better definition of the category and a centralized law.”

Rajiv Sharma,CEO and Co-Founder, dPronto

Start-ups face a lot of teething troubles; keeping this in mind we would like to see the removal of direct and indirect taxes on start-ups. Would even recommend a tax holiday for start-ups (just like that for IT companies during the 90s) for a period of 3 years. Removal of “angel tax” is equally important since Angel funding is crucial to foster the start-up eco-system in India at a time when banks and venture capital funds are pulling away from providing financial aid to such companies. Start-up companies require innovation to grow fast and hence compliance of stringent norms robs off the ingenuity of new beginners. We would like to replace audits with self-reliance certificates as proposed by Nasscom.

One of the pressing issue that most startup entrepreneurs are talking about is clarity in taxation on new businesses and startups. Government needs to definitely bring in more clarity in this budget!

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  • Regarding the proposals for the Direct Taxes in the Union Budget 2016. Keeping in view of the 7th Pay Commission Recommendations to Central Government Employees w.e.f 1-1-2016 ,the exemption of Income Tax slab may be increased from Rs 2.5 Lakhs to Rs 5 Lakhs and Rs 6 Lakhs for the senior citizens and Rs 7 lakhs in case of very senior citizens, in the interest of the taxpayers . The deduction under section 8OC may be Rs 2.5 akhs . The deduction under section 24 (i) may be Rs 2 .5 lakhs . Transport allowance may be exempted upto Rs 2000 p.m . from ,Dr.Sopan Kasinath , Associate Professor , Railway Degree College ,Secunderabad.

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