Union Budget 2019: FM announces slew of provisions, exemptions, tax benefits for Indian start-ups

Start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums, Nirmala Sitharaman said.

New Delhi: Finance Minister Nirmala Sitharaman gave major boost to the Indian start-up echo-system in the Union Budget 2019 by announcing a slew of provisions, exemptions and tax benefits for them.

Presenting her maiden Budget in Parliament, Sitharaman proposed to the condition for carry forward and set off of losses in cases of eligible start-ups will be relaxed enabling them to carry forward their losses on satisfaction of any one of the two conditions – continuity of 51 percent shareholding/voting power or continuity of 100% of original shareholders.

Further, the provision which allows exemption of capital gains from sale of residential property on investment of net consideration in equity shares of eligible start-up shall be extended by 2 years, she said.

“Thus the benefit shall be available for sale of residential property on or before March 31, 2021,” the FM added.

She said that the condition of minimum holding of 50 percent of share capital or voting rights in the start-up is proposed to be relaxed to 25 percent. The condition restricting transfer of new asset being computer or computer software is also proposed to be relaxed from the current 5 years to 3 years.

Furthermore, the Start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums.

In her Budget speech, the Finance Minister said that the issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification.

“With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department,” she said.

Besides the above tax benefits, the Finance Minister also proposed to start a television programme within the DD bouquet of channels exclusively for start-ups. This shall serve as a platform for promoting start-ups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning. This channel shall be designed and executed by start-ups themselves.