A new set of tax plan for startups in Union Budget 2019

Last Updated at: November 04, 2019
3265
A new set of tax plan for startups in Union Budget 2019

HIGHLIGHTS:

  • DPIIT proposed simpler tax regulation on ESOP
  • Angel tax benefits for Category II AIF, currently concession available to Category I AIF
  • GST exemption for fund managers based in India

As the new government is due to present the full Budget in Parliament on July 5. The finance ministry is reportedly looking at ways to provide tax benefits for startups in an earnest attempt to encourage entrepreneurship and employment opportunities.

In the interim budget announced in February, Startups had got barely any mentions from the Startup-pro Modi government. So the upcoming full budget is much expected among entrepreneurs and investors.

The Department of promotion of industry and internal trade (DPIIT) and revenue department proposed different ways of tax sops for new business ventures, it includes simpler regulations on tax levied norms on Employee Stock Ownership Plan (ESOP) at the time of sale of shares.

File Your Taxes on time and stay Stress-free

Two stages of ESOP taxation:

At the time of allotment of shares after he has exercised his option on the completion of the vesting period, the difference between fair market value and the exercise price is calculated and taxed accordingly.

Second, it was levied when the employee opts to sell the allotted shares. That is the profit made upon selling those shares are taxed as capital gains earned during the year.

Many Startups use ESOP as an important means to attract good talents, as they cannot afford to pay very high salaries and it’s also used as a retention mechanism, often taxing them is not feasible. At the same time levying tax dilute the essence of providing ESOP option.

Besides, DPIIT is looking out for the possibility of providing angel tax benefits to Category II AIF (Alternative Investment Funds), a concession currently available to Category I AIF investors.

Category I AIF invest in a startup or early-stage ventures, social ventures, SMEs, infrastructure projects which government considers as socially or economically desirable. Category II AIF does not undertake leverage or borrowing other than to meet day-to-day activities such as real estate funds, PE funds, funds for distressed assets.

The department is also seeking other tax benefits for AIFs to give a push to fund new businesses, for instance, the loss should be passed on to investment partners just like the profit of AIF.

Also, there is a plan for a goods and service tax (GST) exemptions for fund managers based in India as the tax does not apply to those offshore. As the GST related matters are outside the realm of budget, this proposal is unlikely to be accepted.

Written by S.DHARANI KUMAR

What GST returns have to be furnished by a non-resident taxable assessee?

Non-resident GST tax payers who deal with imported goods and services must file their GSTR 5 form.Understand the procedure for GST registration and GST returns here.

What are the other MSME Schemes Launched by the government ?

After having framed the MSME Act, 2006, the government has introduced other schemes including credit linked capital subsidy, zero defect zero effect, women entrepreneurship, etc. More on Income Tax Return Filing.

When is it mandatory to file return of income?

Individuals who belong to HUF, AOP, BOI with income more than the exemption slab must file their income tax returns. It is mandatory for companies to file their income tax returns. Learn more about ISO Certification.

What are the benefits of ISO 9001 Certification?

Improves communications and reporting. Reduces mistakes. Better quality services and products. More reliable production, delivering and schedule. Standards controlled by annual assessments. More info on NGO Registration in india.

Do I need to own office property to start an NGO?

You can start an NGO in your own property or a rented one. In the later case, you need to submit an NOC or No Objection Certificate from the owner.More about Udyog Aadhar Registration.

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A new set of tax plan for startups in Union Budget 2019

3265

HIGHLIGHTS:

  • DPIIT proposed simpler tax regulation on ESOP
  • Angel tax benefits for Category II AIF, currently concession available to Category I AIF
  • GST exemption for fund managers based in India

As the new government is due to present the full Budget in Parliament on July 5. The finance ministry is reportedly looking at ways to provide tax benefits for startups in an earnest attempt to encourage entrepreneurship and employment opportunities.

In the interim budget announced in February, Startups had got barely any mentions from the Startup-pro Modi government. So the upcoming full budget is much expected among entrepreneurs and investors.

The Department of promotion of industry and internal trade (DPIIT) and revenue department proposed different ways of tax sops for new business ventures, it includes simpler regulations on tax levied norms on Employee Stock Ownership Plan (ESOP) at the time of sale of shares.

File Your Taxes on time and stay Stress-free

Two stages of ESOP taxation:

At the time of allotment of shares after he has exercised his option on the completion of the vesting period, the difference between fair market value and the exercise price is calculated and taxed accordingly.

Second, it was levied when the employee opts to sell the allotted shares. That is the profit made upon selling those shares are taxed as capital gains earned during the year.

Many Startups use ESOP as an important means to attract good talents, as they cannot afford to pay very high salaries and it’s also used as a retention mechanism, often taxing them is not feasible. At the same time levying tax dilute the essence of providing ESOP option.

Besides, DPIIT is looking out for the possibility of providing angel tax benefits to Category II AIF (Alternative Investment Funds), a concession currently available to Category I AIF investors.

Category I AIF invest in a startup or early-stage ventures, social ventures, SMEs, infrastructure projects which government considers as socially or economically desirable. Category II AIF does not undertake leverage or borrowing other than to meet day-to-day activities such as real estate funds, PE funds, funds for distressed assets.

The department is also seeking other tax benefits for AIFs to give a push to fund new businesses, for instance, the loss should be passed on to investment partners just like the profit of AIF.

Also, there is a plan for a goods and service tax (GST) exemptions for fund managers based in India as the tax does not apply to those offshore. As the GST related matters are outside the realm of budget, this proposal is unlikely to be accepted.

Written by S.DHARANI KUMAR

What GST returns have to be furnished by a non-resident taxable assessee?

Non-resident GST tax payers who deal with imported goods and services must file their GSTR 5 form.Understand the procedure for GST registration and GST returns here.

What are the other MSME Schemes Launched by the government ?

After having framed the MSME Act, 2006, the government has introduced other schemes including credit linked capital subsidy, zero defect zero effect, women entrepreneurship, etc. More on Income Tax Return Filing.

When is it mandatory to file return of income?

Individuals who belong to HUF, AOP, BOI with income more than the exemption slab must file their income tax returns. It is mandatory for companies to file their income tax returns. Learn more about ISO Certification.

What are the benefits of ISO 9001 Certification?

Improves communications and reporting. Reduces mistakes. Better quality services and products. More reliable production, delivering and schedule. Standards controlled by annual assessments. More info on NGO Registration in india.

Do I need to own office property to start an NGO?

You can start an NGO in your own property or a rented one. In the later case, you need to submit an NOC or No Objection Certificate from the owner.More about Udyog Aadhar Registration.

0

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