Assocham seeks tax friendly environment for startups

New Delhi: In a pre-Budget submission to the Finance Ministry, Assocham on Tuesday sought a taxation friendly environment for the startups saying they should be freed from restrictions on shareholding pattern as budding entrepreneurs require fund infusion during the initial phase.

"Restriction prescribed under Section 79 of the Income Tax Act (IT Act) should not apply to the startup ecosystem where change in shareholding pattern is due to the infusion of funds by investors without change in the management of the company run by original founders," the chamber said in a presentation submitted to Revenue Secretary Hasmukh Adhia.

Rigours of section 79 of the IT Act should be restricted only in cases where the change in shareholding is effected with a view to avoid or reduce tax liability by way of a restructuring exercise, Assocham pointed out.

Besides, it said the tax authorities should treat each taxpayer as a customer of the Tax Department and make adversarial approach between taxpayer and department a thing of the past.

Assocham Secretary General D S Rawat said taxpayers should be provided with facilitating services to encourage them to comply with the taxation rules.

The chamber also suggested merger of Central Board of Direct Taxes (CBDT) with the Central Board of Customs and Excise into a single Central Board of Revenue.

Administration functions should be separated from the law-making jobs, it suggested.

Other suggestions included carrying out impact assessment studies of various tax policy measures and trade flows trends.