Budget 2017 Highlights for Start-ups & SMEs

Last Updated at: Nov 12, 2020
As per the recent Finance Act, startups registered with the Department for Promotion of Internal Trade and Industrial Policy (DPIIT) are eligible to get tax exemption under Section 54 (GB) of the Income Tax Act. Section 54GB relates to tax on long-term capital gains received upon the sale of a residential property of an individual. The government has exempted individuals from paying this tax if such long-term capital is invested in a registered startup.


Many startups were not thrilled with the announcements made in the general budget of 2017. The fact is that the Central Government’s emphasis on promotion of digitization was not given a substantial boost. The expectations had built up but the results were not up to the mark in any way.
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.

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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).

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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.

It is safe to say that the few measures for promotion of the startup culture may not be sufficient in the long run. The Central Government must take other concrete steps to ensure that meritorious entrepreneurs all over the country do not shy away from jumping in the bandwagon and enhancing the economy.

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