2017 can be seen as a year of optimism & newer opportunities for fintech companies in India owing to demonetization by the Indian government. Since the tech landscape of India is on the verge of being more digitally advanced, fintech is capturing mass attention in transitioning India from a cash-dependent to a sustainable cashless economy.
With the government's push to run a digitally-driven economy to the new interfaces of digital payments like Unified Payments Interface (UPI) apps to changing paradigms of people adopting digital wallets, India is likely to expect an accelerated growth in fintech growth.
After the exemption of tax for 3 years to startupreneurs in 2016’s Budget, fintech companies' hopes are high yet again. Surely, the government has a tough task ahead to meet a galore of expectations from startup ecosystem to varied sectors. Will the government encourage and assist fintech companies in this year's budget is yet to be seen.
Listed are the top #8 expectations of fintech companies' chiefs for Budget 2017-18.
Incentives to Take the Cause of Financial Inclusion Forward
"The government has done a tremendous job of setting the platform for future digital penetration. If this wave of digitization is to be sustained, particularly in the financial space, says S Kumar Srivatsan, Founder & CEO of OptaCredit.
Expectation: The government should put aside a corpus that will invest and strengthen the infrastructure and and ecosystem.
Likely outcome: Since the fintech sector is juggling various innovative mechanisms to disrupt the existing order. The sector needs incentives in order to take the cause of financial inclusion forward. Another aspect that is very crucial is the security of transactions that happen online.
Exemption in Income Tax Rates
Post de-monetization, the tax net is likely to be cast much wider, thus increasing the pool of people paying taxes to the government. With the increasing pool, the required taxation rates can be reduced, while meeting the total tax collection requirement to meet expenditures.
The most anticipated change in the upcoming budget is the change in income tax slabs, says Tejasvi Mohanram, Founder and CEO, Rupeepower. To take the startup revolution to the next step and promote young entrepreneurs, the government is likely to dole our tax sops, including concessions on ESOPs, he added.
Expectation: The required taxation rates can be reduced.
Likely Outcome: Lowering of interest rates will increase credit offtake and have an overall positive impact on the economy. Fintechs like Rupeepower, that are helping digitize the credit origination process are likely to benefit and gain traction.
Encourage Digital Transactions even in the Forex Space
There should be continuous focus on ease of doing business and a thrust on the development of technological infrastructure in the country, says Isha Kedia, Founder, DoorstepForex.com.
Expectation: Government must look forward to encourage overseas digital transactions.
Likely Outcome: It will help the Indian business segment to grow with increase in sales. Besides, fintech will be able to gain much more opportunities in the digitally driven economy.
Additional Tax Benefits to Promote Cashless Economy
In the wake of the landmark economic move of 2016, one of the most important changes we are likely to see over the course of this fiscal year is how we are going cashless Cash crunch made problems for both buyers and sellers, says Siddharth Arora, co-founder, ePaisa.
Expectation: Additional tax benefits to people post demonetization is expected from government credit cards, debit cards and mobile wallets, apps, UPI are expected to be part of the Union Budget 2017-18.
Likely Outcome: More opportunities to look at from the end of people as well as fintech innovations.
Lowering SME loans by 1% based on the Amount of Digital Acceptance
An efficient policy framework and incentives will boost the SME sector. Additionally, a 10% tax refund on all incremental earnings ‘year on year’ in digital forms and withdrawal of the fuel surcharge of 2.5% would offer much relief and benefit to industries across the economy, says, Varun Rathi, COO & Co-founder of Happay.
Expectation: The government should also consider lowering Working Capital / SME loans by 1% based on the amount of digital acceptance.
Likely Outcome: The SME sector will see a surge in investments. And so is the fintech space with a possible increase in demand of loans from SMEs.
Extra incentives/concessions for the ESOPs, Unlisted Securities and Convertible Instruments
Since the startup ecosystem in India is flourishing every year. Some startups have seen a phenomenal growth & success towards implementation of their ideas last year. And for further boost to growth of startup economy, the upcoming budget announcement is very crucial.
Post demonetization, we have witnessed growing traction for technology startups, the government should also recognize their contribution in the digital economy vision of India by considering extra incentives/concessions, says Manavjeet Singh, CEO & Founder, Rubique.
Expectation: Exemptions on taxes like the exemption under the minimum alternate tax for startups, tax concessions for the ESOPs, unlisted securities and convertible instruments.
Likely Outcome: Since the ESOPs are something that companies can give to employees when they are short on cash as an incentive, the exemption in tax rates on ESOPs will boost the more use of it by companies. Hence, it will boost the fintech space in the same.
Financial Inclusion for Imparting and Increasing Awareness for Digital Payments
The demonetization drive needs to be followed by strong, systematic and organized steps by the government, and we need to rope in users from tier 2, 3 and 4 cities and towns.
Expectation: A financial inclusion should be made to impart and increase knowledge and awareness of both merchants and consumers, on how to pay and accept payments digitally, says Shailaz Nag, COO, PayU India
Likely Outcome: Awareness of digital payments in every nook and corner of India will boost the digital transactions. It will make both merchant and consumers.
Additional Cess and Levies on Service Tax Should be Removed Under GST
From sectoral point of view, SME sector is struggling to stay afloat as bank credit is at its lowest. And do not forget this is going to be the last budget sans election fervor, says Satyam Kumar, CEO, Loantap.
Expectation: Tax on services (even under GST) should remain at 14% level, and additions cess and levies should be removed.
Likely Outcome: In this case, the fintech companies will attain the breakeven point soon.
(With inputs from Nidhi Singh)