How the D2C Sector Will Benefit From Budget 2021
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The Union Budget of 2021 is touted as a booster rocket for the Indian economy, one that will place India on the path to non-inflationary growth and make for a new historic decade in the country’s history. The Budget envisions not only a strong recovery in the new fiscal year but also continuous sustainable growth at 7-8 per cent.
All in all, tremendous hope is attached to the budget, given the recent economic recession that put several industries in a tight spot. And now, all sectors are looking forward to a relief package that can put them back on track. The D2C sector, in particular, has its hopes high. Discussed below are a few ways through which it will benefit from the Budget 2021.
Tax Holidays For Startups
Thanks to the bid to facilitate an expeditious recovery for coronavirus-affected companies in the post-pandemic times, startups can look forward to a one-year extension of the tax holiday. This is to say that the Union Budget seeks to extend the said tax holiday until the end of March 2022. Also, for the investment made in start-ups, there is a proposal to extend the eligibility period of claiming capital gains exemption by one more year, that is, till March 31, 2022.
In effect, any company incorporated on or before the 31st of March, 2022, and undertaking eligible business will be in a position to avail of the prescribed tax rebate of 100 percent of profits. In the meantime, the extension of the capital gains exemption will benefit individuals and Hindu Undivided Families in terms of investment in eligible startups by a margin of one year. In simple terms, a taxpayer could invest in eligible start-ups vis-a-vis residential property undertaken on or before the 31st of March, 2022. This is conceived to boost investments in the startup sector, with a clear eye for growth and expansion.
While there have been ambitious initiatives to improve the capital gains tax situation, key importance lies in their nature of implementation and oversight. To that end, some put forward that early-stage investors should be retained and ironed out to ensure all these measures come to positive fruition.
Exemption For Investors & Lowering Compliance Burden On Startups
The Union government also envisions incentivizing incorporation of one-person companies, a move that will give unprecedented ease of mobility to start-ups and innovators. This move will enable firms to grow without limitation on paid-up capital and turnover; allow ease of conversion into another type of company as and when they please; reduce the residency limit for Indian citizens to establish an OPC from 182 days to 120 days, and also allow even non-resident Indians to incorporate OPCs in India.
Moreover, in what appears to be quite a significant facelift, the paid-up capital of small firms has been pushed from INR 50 lakh to INR 2.50 crore. These steps are a reinforcement of previous start-up-oriented measures announced by the Union Government, and the same include broadening of startups, regulatory simplification, and relaxation, as well as significant income tax exemptions. Recently, the government also gave the green signal for the Start-up India Seed Fund Scheme that entails a corpus of INR 945 crore. The same aims at directing financial assistance for start-ups towards prototype development, proof of concept, product trials, market-entry, and commercialization.
What to make of the Union Budget of 2021
The Budget 2021 appears to be an all-inclusive one as it seeks to benefit sectors of all shapes and sizes, be it startups or gig economy workers. While success will depend on the efficacy of its implementation, the extension of capital gain tax exemptions for investors and extension in the tax holiday, in particular, are much-appreciated moves by the Union government. In effect, this initiative will allow the start-up sector to access and utilize the rocket fuel it needs to scale, thereby encouraging home-grown units to thrive in a time when the ecosystem is laying earnest emphasis on “Make in India.”
Especially for D2C entities with in-house manufacturing, the initiative to build a portal for gig workers along with social security is a heavily significant one; it is so because this undertaking will effectively streamline workforce management across a company and reduce the bulk on employers’ compliance issues. This will be even more impactful for entities with multiple operation sites since they need external boosts to propel forth their business and find pathways to continue on their innovation journey.