Every year, startup founders look forward to the Union Budget, and this year, in a welcome move for startups and MSMEs, Finance Minister Nirmala Sitharaman proposed to extend the eligibility for claiming tax holiday for startups by one more year – till March 31, 2022.
Further, in order to incentivise funding of the startups, she extended the capital gains exemption for investment in startups by one more year- March 31, 2022. In a move that will directly benefit startups and innovators, she proposed to incentivise the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on
paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non-Resident Indians (NRIs) to incorporate OPCs in India.
This is one of the most business-friendly Union Budget we have seen in a while, and this is rightly so given the urgent need for a strong economic recovery, said Kumar Ritesh, Founder CEO, CYFIRMA, a Cyber intelligence and threat discovery startup.
“The initiatives to ease the setting up of new companies bode well for the technology sector. This will promote an even greater entrepreneurial culture and put India squarely on the global map of technology innovation. Further, the Finance Minister’s announcement that companies will receive Rs 1,500 crore to encourage their adoption of digital payments will go a long way to promote Fintech innovation, and more importantly, give millions of unbanked Indians the opportunity to participate in the financial system,” he said.
He added that with digital payments becoming mainstream, the government should also start looking at uplifting cybersecurity awareness and education among businesses as well as consumers. This way, the twin engines of growth – innovation and digitalisation – can be sustainable in the long run.
Reacting to the Budget, Pankit Desai, Co-founder CEO, Sequretek, a cyber security startup based in Mumbai, said the much-awaited Budget 2021 has provided a significant push for healthcare, agriculture and rural economy, but unfortunately nothing concrete for startups and the surrounding ecosystem.
“For the majority of startups, demand remains the same, nothing changes, its business as usual. Forming a one person company doesn’t help startups whatsoever unless they want startups to form a single person company. There is some push for fintech and startups from this sector will stand to benefit, however, the budget did not share anything substantial in terms of ease of doing business, compliance or GST taxation that would make life any different for a cybersecurity company like ours. I am hoping that the stimulus and other investments that allow the economy to do well, indirectly will support us as we finally serve that economy in some shape and form through our customers,” he said.
Many startups have welcomed the move to boost digital payments. The government has earmarked Rs 1,500 crore for a proposed scheme that will provide financial incentive to promote digital modes of payment.
Pavan Adipuram, Co-founder CEO, ChitMonks, a Hyderabad-based BlockChain startup said, “For a digital first company like ours, the proposal of Rs 1500 crore to incentivise digital payments will accelerate the financial technologies sector growth. In investment instruments like Chit Funds, Mutual Funds, online payments, more companies are expected to move to 100% digital payments mode which will ensure further transparency and confidence on individuals and it will address the problem of any scams running that take advantage of innocent individuals.”