How Budget 2019 Will be a Game Changer for Indian Startups
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The ‘Bahi Khaata’ of FM Nirmala Sitharaman and the steps to improve the future of startups in India were the two things that caught the eyes of every person waiting for budget 2019. As stated by Mrs Sitharaman, ‘India eyes to become five trillion dollar economy by 2025’, and startups will play a huge role in this. India, being the third largest startup ecosystem is already at the top of the charts and after the budget, a further rise in position can be expected.
Startups in India have not only accumulated large funding ($4.3 Billion) in the year 2018 but have also been one of the highest job generators. Improving the startup ecosystem will help the government in resolving various economic issues, but also aid in becoming a global leader in the coming years. So, what are the major steps that have been taken and how they will benefit the startups? Well, take a look to find out.
#1. Relief from Angel Tax Scrutiny
The section 56(2) of the Income Tax Act which states that any investment amount in excess to the fair value of the company will be taxed as income from other sources was acting as a barricade for a lot of startups. Due to this, startups that got funding from big investors at premium rates have to go through scrutiny even after stating the source of income. But, now startups offering requisite declaration and information will not have to go through scrutiny and there will be an online portal for verifying the sources which will further ease the process. Previously, this benefit was limited to startups which raise funds from Category-I AIF, but now it has been extended to Category-II AIF.
#2. Change in FDI Norms
Another key point of Budget 2019 is the change in FDI norms for startups from different sectors. The major was increasing the FDI (Foreign Direct Investment) limit from 49% to 100% in the insurance broking intermediaries. Along with this, the Government is also looking to change the FDI norms in aviation, media, animation, etc. which will also bring growth in the industry. Also, the decision to ease up local sourcing norms for Foreign Direct Investments in single-brand retail trading will also attract investments in such companies. All these changes will help new businesses to get a much better boost and can aid in breaking the previous years’ funding records.
#3. TV Channel Dedicated to Startups
One of the major treats for startups in Budget 2019 was the announcement of a new channel launch exclusively for them. This will give exposure to startups that are looking for funding and will create a platform where new businesses & venture capitalists can meet up for mutual benefits. In addition to this, other things will also be discussed, such as the common problems faced by startups, tax planning strategies, and many others. The channel will be designed as well as managed by the startups and will be a part of the Doordarshan family, most probably the 22nd member.
The budget has brought a lot for the startups, and in the coming years, more additions, as well as editions, can be seen to improve the ecosystem. The steps to ease the taxation rules on startups, as well as Angel investments, will surely boost the number. Along with this, changes in labour laws, education, and rental housing will also have a direct impact on startups. The change in FDI norms for Single Brand Retail will help the companies that have online as well as offline presence. The overall budget holds a long term vision and shows the intent of the Government to bring real change. Now, only time will tell what effect these changes will bring, and how much will these add to the economy of India.