Budget 2017 Highlights for Start-ups & SMEs


The start-up community has largely been dissatisfied with the Union Budget 2017. While expectations were high, given the recent impetus on digital, only a few concessions have been granted to start-ups. Here are the highlights of Budget 2017 concerning start-ups:

Tax Break

The Finance Minister Arun Jaitley has increased the period of profit-linked deductions available to start-ups to seven years, from five years currently. This tax break is, however, only available for any three of the seven years (as opposed to three of five years currently). Also, for a start-up to be eligible, it must be registered with theDepartment of Industrial Policy & Promotion (DIPP).

Minimum Alternative Tax

One of the major demands of the start-up community was the removal of MAT. FM Jaitley, once again, didn’t satisfy the demands, but offered some concession. All start-ups can now carry forward their MAT to 15 years, up from the present period of five years.

Income Tax benefit to MSMEs

Companies with an annual turnover of up to Rs. 50 crore will get a reduction of 5% in the tax rate, to 25%. Companies currently pay a tax rate of 30%. An estimated 96% companies in India fall into this category, translating into a loss in revenue of Rs. 7200 crore. The aim is to get more proprietors and other unorganised entities to register as companies.

Carry Forward of Losses

Start-ups will now be able to carry forward losses so long as the founder is involved in the company. Until now, the founder had to continuously retain a minimum of 51% of voting rights for this to be possible.

A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.