Expectations from Budget 2017: A Promising Year for Fintech
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
2016 has been an eventful year for businesses. Demonetisation has posed a challenge for several traditional businesses. The government has given digital commerce a strong push. All businesses including agriculturalists are being brought into the mainstream economy.
With this backdrop, 2017 is poised to be an exciting year for both taxation and the fintech space.
Large scale tech adoption – Traditional ways of investing and tax saving will now gave way to tech driven means. Use of technology via machine learning and AI offers transformative opportunities in the tax saving & investment space. Taxpayers who do not have sufficient knowledge about investing or markets can use technology to help them choose products that meet their goals. This will help them make informed decisions about how, where and when to invest. The government can encourage innovation in this space by offering tax incentives to fintech companies.
Greater tax compliance – As more and more businesses and individuals become part of the formal banking and digital space, this will lead to increase in return filing and compliance. The government has already announced a lower presumptive rate of income for payments received digitally. Under section 44AD of the income tax act, businesses with turnover of less than Rs 2crores can opt for presumptive taxation. Here income is assumed to be 8% of receipts. As per the announcement, income shall be assumed to be 6% of digital receipts. While further details are awaited on this announcement, we hope the government will make efforts to ease compliance and provide benefits so businesses can leverage digital commerce to their advantage.
Reduced burden of taxes – With launch of income disclosure scheme and demonetisation, tax collections have gone up. Only time will tell if these moves have led to wider compliance, if true, this would lead to a steady increase in revenue for the government. The government can use this to pass on higher tax benefits to the common man. The government could also mop up excess funds in bank accounts by raising tax deductions available under 80C for PPF. This will help collect these funds for its development projects.
Fruition to the start-up India campaign–Our PM had announced a string of measures to give boost to start-ups and entrepreneurship in India. Tax exemption was offered to start-ups incorporated after 1st April 2016. However, most start-ups take close to 5-7years to make profits and this time limit should be increased. Eligibility norms for availing these tax benefits must also be relaxed. Besides, we are hoping the government will continue its focus on easing tax and regulatory compliance for start-ups in the Budget for 2017.
Use of India Stack - The use of India Stack for Identity (aadhaar) and payments (UPI) will help reach people who have suffered financial exclusion. The personal finance space will witness massive innovation. Use of these technologies can bring down cost of customer acquisition besides making investing and access to financial services seamless and paperless. The government must consider supporting startups who are innovating the fintech space. This can be done by offering funding and smooth approvals to help them get started.
Launch of GST – GST poses another exciting opportunity in the indirect taxes space. Technology will play a massive role in the implementation of GST. Besides launch of GST will mean more and more businesses will need technology to help streamline production and distribution. Start-ups like ClearTax, with both technological and domain expertise, can play a significant role in easing transition and compliance for businesses with GST. We hope the government will thrash out differences with states and be in time for launch of GST.
We are excited with the opportunities that await us in the fintech space. India will see a massive tech adoption and increased tax compliance. The government has a very important role to play in this journey and hopefully Budge 2017 will not disappoint.