This is What Startups Expect from Arun Jaitley's Budget

This is What Startups Expect from Arun Jaitley's Budget
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Government of India is taking many steps towards making India a startup-friendly nation, however, there are still several hurdles in entrepreneurial journey including taxes, regulatory frameworks, lack of capital. If these issues are addressed properly, Indian startups could really have a strong ecosystem to thrive.

Entrepreneurs are eagerly waiting for the upcoming Budget which they hope will bring some good news for their startups. Here are 6 expectations of the founders from their wish list.

1. Tax on ESOPs should be revisited:

Startups want government to reconsider employee owner program that is Employee Stock Ownership Plan (ESOP). It is the program that provides company’s workforce with the ownership interest in the firm. “ESOPs constitute of major compensation for startup employees and is a huge motivating factor for them, however because of the tax levied on ESOPs one hardly ever ends up converting them to stocks,” said Samar Singla, CEO and Founder, Jugnoo.

2. Need More Clarity on Startup Policy:

Recently, the Government announced certain policies for startups in Startup India, Stand Up India program. With the upcoming budget, startups want more clarity on these initiatives and moreover they want to know that how soon these plans will come into action. They want government to throw more light on these initiatives so that they can get better understanding of the same.       

3. Relaxation Around Taxation:

Taxation is the major roadblock for startups and investors for raising funds. Raising initial rounds of funding is tricky task for the startups. And on top of that taxation always brings with it an additional burden for the angel investors and for the startup. This is the reason why startups have eventually started to move to countries like Singapore where they find relaxed norms.

"In particular, I'd be keen to see service tax relief offered to early stage startups. Since most young companies are not profitable for the first few years, service tax and not income tax tends to be a large burden on their financials. I hope government would take cognisance of this and offer part or full relaxation for the early years," said Sidharth Gupta, Co-founder, Treebo Hotels.

4. Access to Cheaper Loans & More Startup Friendly Debts:

In India, funding sources are mostly equity based. With this coming budget, startups hope for cheaper loan access with increase in startup-friendly debts. “Whilst equity funding is more popular amongst startups worldwide but a complete vacuum of Debt funding is very limiting for most Indian startups. Therefore access to cheaper loans and more start up friendly debts, is the need of the hour and a solid policy framework with a robust and all-inclusive implementation plan is needed,” said Shipra Dawar, CEO, ePsyClinic.

5. Access to Infrastructure:

Infrastructure plays a very important role in the growth and success of any business. Startups hope for better infrastructure facility in incubators so that they can do their research more properly.

6. Ease of Doing Business:

The cost of doing business in India for startups is staggering. If government’s upcoming budget make compliance easy and fast for the startups, it help them to scale up and keep innovating with speed. “High Compliance costs for a startup that is still struggling to build on its market is more often than not an added drain. Startups do many good things like generate employment and if successful can be vehicles of growth, innovation and job development hence a tax holiday for 1-3 years for a startup can be a great step,” said Dawar.

Government is all set to present the Union Budget FY 17 on Feb 29, 2016. We have to wait and watch how much of these expectation are fulfilled.

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Edition: October 2016

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