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Tax Benefits Every Indian Entrepreneur Must Know About All you need to know about taxes

By Naval Goel

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Being an entrepreneur refers to wearing many hats that eventually means managing different functions and people. It is not an easy job to be an entrepreneur, it comes along with many pros and cons that can sometimes leave you stuck in a pot. Those who are running their company know that the success not only depends on the numbers of clients that you have on board, or on the transactions that you made, but the way you manage your funds and use available resources. If you own a company or planning to do so then it is obvious that you have a budget to run the things.

For all entrepreneurs, the basic steps towards success should be generating revenue and managing the same. It is vital for you to familiarize yourself with the basic money management skills that includes an understanding of credit, tax forms and much more. Whenever it comes to tax, a lot of questions will arise like how much you have to pay and why? and many different measures to save it.

Nowadays, we are all aware of the fact that the number of startups are growing day by day. Almost everyone has a dream of being an entrepreneur and using different ways to attain entrepreneurship successfully. As a boost for the startup industry, the government also brought some changes in tax exemptions that slew it down and allow budding entrepreneurs to take advantage of the same.

During the Union Budget 2016-2017, under the "StartUp India policy" several changes were made that resulted in huge concession and exemptions. However, still many Indian entrepreneurs are not aware of the different tax benefits that they can get as an entrepreneur.

Below are a few tax benefits that you will get on being an entrepreneur

Full tax exemption for initial three years

During the union budget 2016-2017, the finance minister of India- Mr. Arun Jaitley proposed to offer, a 100 percent deduction of the profits earned by a qualified startup dealing in development, innovation, deployment or commercialization of new products, processes or services related to technology or intellectual property. To provide a much-needed boost to all the budding entrepreneurial ventures, the Indian government has decided to do away with taxing them for the initial three years of their business. It was announced in the Budget Session of the Parliament that startups do not have to pay any taxes on profits for initial three years of their operations except MAT. MAT refers to "Minimum Alternate Tax' and is calculated on "book profit'.

Elimination of "Angel Investment Tax'

To provide more relief and to offer a boost to the startup industry, the government of India has also done away with the "Angel Investment Tax,' that was introduced in 2012.

Under the same, angel investors which include family, friends and domestic funds not registered as VC funds, will not pay tax on these investments. The Indian government has provided the liberty to them under which they can offer shares to investors without any taxation hassles. This move has been taken by the government by amending Section 56(2) (vii) (b) of the Income-Tax Act.

However, there is no doubt that it comes along with some restrictive terms. Only those startups can take advantage of tax exemption which are able to fulfill the required conditions that are specified by the Department of Industrial Policy and Promotion (DIPP). To take the advantage of the same, a startup will have to first get a certificate of eligibility from the "inter-ministerial board of certification.'

Capital Gains Tax Exemptions

Nowadays, an eligible entrepreneur can get an exemption of 20% in capital gains tax. The tax that is charged on profits that occurs from the sale capital assets, such as stocks, bonds, etc. is known as Capital Gains Tax. It is in demand for a long-term and finally, in 2016 it got the approval from the government. Prior to this provision, a lot of investment in India were directed through Mauritius as capital gains tax on investment from there was waived off by the government as a result of the Double Tax Avoidance Treaty with Mauritius.


Above mentioned tax policies will surely attract a lot of youngsters towards the startup industry and it will bring a great boost to it.Such policies offer the required support to entrepreneurs in achieving their goal. Now the need is to keep our eyes open and take advantage of everything that government introduces for us, it will not only motivate people but will also help people in managing funds beneficially.

Naval Goel

CEO, PolicyX.com

Naval Goel is the CEO of PolicyX.com.
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