What's in Budget 2016 for Technology Start-Ups and Entrepreneurs

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The latest talk of B-town (Business, not Bollywood) is the Union Budget for 2016-2017. With several different forms of business supporting measures, start-ups can expect some positive support for their ventures. Entrepreneurs have reacted positively to the changes.



  • Excise duty and customs are relaxed for certain sectors including IT. This can help reduce expenses and encourage expansion in the industry.
  • Covering about 6 crore houses in the next 3 years, digital literacy mission scheme for rural India
  • 500 crores announced for Prime Minister’s StandUp India initiative. This will directly boost start-ups and encourage growth.
  • A digital archive will be established which will be a singular portal for all education related e-certificates, such as degree/professional course certifications
  • 1000 crore set aside for higher education financing
  • Startups to get 100% tax exemption for 3 years except MAT for creation of jobs

Finance Minister Arun Jaitley said, “Investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 to 15% on par with domestic institutions. This will enhance global competitiveness of Indian stock exchanges and accelerate adoption of best-in-class technology and global market practices.” This can effective the competitive pricing and stock market performance of companies in IT sector in 2017.

Entrepreneurs in India are welcoming the move unabashedly. Ashwani Rathore, CEO and Co-Founder, SpiderG said, ““This union budget is well balanced and perfectly linked with the vision of prime Minister’s ‘Startup India Standup India’ campaign with 100% deduction on profit for startups for 3 out of five years. This exemption will reduce compliance burden and cash outflows. The decision of allotting 500 crores for Startup segment is a welcome move which will encourage entrepreneurship in coming years.

Capital gains tax exemption on investments and lowering the period from 3 years to 2 years for definition of long term Capital Gains in unlisted companies will pave way for new angel investors to invest in startups. With this initiative there will be growing funding support for startups in coming years.”

Some Apprehensions

Some entrepreneurs have also expressed their apprehension over the minor raise in the form of the Krishi Kalyan Cess. Zafar Rais- CEO, MindShift Interactive stated, “The budget also refers to ease of doing business by amending the Companies Act in order to set up a startup in a day. The Budget has gone beyond to encourage entrepreneurship across all boards, and also of specific categories like the SC/STs. It also talks about skill upgradation and creating clusters for them. The government in the past had mentioned to cut down the corporate tax and has proposed with regard to small units having a turnover of Rs 5 crore, reduction in corporate tax rate from 30% to 29%. This should prove to be rather advantageous.

Service Tax getting an increase from 14.5 to 15% in the form of the Krishi Kalyan Cess is really not an affirmative highlight as it adds pressure on negotiations when looking at net billings clients demand. From a media and advertising stand point, an increase in ST especially on electronic goods doesn't seem favorable at all. Currently, India’s exponential mobile penetration and app consumption patterns are driving the growth of the mobile advertising industry, and this tax increment could hamper the innovation efforts of the entire ecosystem comprising mobile development startups, advertisers and publishers. We would have preferred a more future-focused policy regarding this particular aspect."

What remains to be seen is how effective management can counter the increase/decrease of taxes and put the changes to optimum use. What do you think of the budget and how do you predict it will affect you? let us know in the comments on our official facebook page, Entreprenuer India

Rustam Singh

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