Start-ups for tax relief on angel investments in Budget 2018-19

New Delhi: The Indian start-up eco-system is looking forward to the union budget eagerly for addressing the tax dilemma. With high-quality entrepreneurs, good ideas and the very important funding ecosystem, start-ups have become an integral part of the India’s economic growth and job creation.

The budget is an occasion which is giving them hope for focussed reforms which will help them overcome economic and financial issues. Their expectations are more towards business growth and expansion of start-up universe, availability of funds and global investments and towards creating a start-up environment with minimum policies and regulations.

With effective reforms and regulations Indian start-ups and entrepreneurs can scale up the performance and success level, vis-a-vis start-ups overseas.

Sharing their concerns and expectations from the Union Budget 2018, below are comments from investors and start-ups from various sectors.

Sashi Reddi, the Founder and Managing Director, SRI Capital (an early stage venture capital company), insisted on curbing angel tax reform this Union budget.

Reddi said, “If there is one law that jumps out as specifically designed to destroy the startup ecosystem, it is the angel tax. When an investor puts money into a startup, tax authorities are insisting on treating that as income and taxing it at the full income tax rate of 30.9%. So angel investors who are deploying their hard earned cash to back risky startups are being punished while stock market operators enjoy benefits for backing large, stable companies.”

Raghavendra Pratap Singh, Co-Founder, i2iFunding said, “If the launch of GST was the biggest reform in the indirect taxation so far, the government is expected to introduce reforms in the direct tax code this time. Given the fragility of state finances, it is clear that not all expectations will be met this time. Thus, the government will have to set its priorities. While industry biggies expect the government to slash corporate tax rates; it would be more interesting to see what the government decides on startups. After the U.S. aimed to reduce the tax rates significantly, there has been a pressure on other countries to follow suit-to remain competitive and protect the export market.”

“To encourage investors to participate more in lending activities at P2P lending platforms, the upcoming Budget should waive off tax on the interest earned by an individual investor through P2P lending. The Budget must go beyond cutting expenditure and increasing revenues. It should aim at inclusions. The P2P lending industry has a crucial role to play in India in achieving greater financial inclusion,” Singh added.

Puneet Chandra, Founder and CEO, Skootr said, “Co-working and managed office space have been the buzzwords that dominated India’s startup and financial ecosphere in 2017. While the year 2018 is expected to be a great year for the commercial real estate market, slight reforms in GST and boosting the overall start-up environment will improve the performance of the commercial real estate sector. Lowering down the GST by capping it at 6-8 % will give some relief to the office space occupants and boost the sector. The sector is expected to receive over 400 to 500 million dollar in overall investment in next 2-3 years. However, discriminating angel investment amongst other investments will lead to lesser support for start-ups. Hence, the government’s decision towards start-up taxation for this Union budget would be a key factor towards the sectors growth, considering the sector is governed by start-up players. Taxation system on angel investors has been creating challenges for the start-ups in getting funds from the angel investors.”