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Govt goes bullish on startups with ESOP holiday, tax relief

New Delhi, Feb 1 (IANS) In a major boost for the growing startups community, Finance Minister Nirmala Sitharaman on Saturday announced five-year tax holiday on employee stock ownership plans (ESOPs) and other tax incentives for startups.

“To boost startups, tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the company or when they sell, whichever is earliest,” the Finance Minister said in her Budget speech in the Parliament on Saturday.

The government also announced that startups with turnover of up to Rs 100 crore will enjoy 100 per cent deduction for three consecutive assessment years out of 10 years.

“It’s heartening that Budget 2020 has simplified the ESOP policy and extended the incentives for up to 100 crore startups over a 10-year period. Incentives for MSMEs like audit exemptions for up to 5 crore companies will enable ease of business for small companies,” IT industry’s apex body Nasscom said in a statement.

The proposal to set up an investment clearance cell that will provide end-to-end facilitation and support to entrepreneurs is also a step in the right direction to empower startups, said the community.

“Under this initiative, startup owners will receive pre-investment advisory, information on land banks, as well as a faster clearance at the state level. We believe this will present unbridled opportunities to entrepreneurs and the overall startup ecosystem in the country,” said Apoorv Ranjan Sharma, Co-Founder and Managing Director, 9Unicorns, India’s first accelerator VC.

One of the biggest steps from the Indian government in tax norms was doing away with angel tax for startups last year and Budget 2020 focused on further improvement of ease of doing business for startups.

“India is the third largest startup hub globally and the announcement of an investment clearance cell to provide end-to-end support to startup founders will encourage more youth to be job creators,” said Kunal Lakhara, Vice President of Finance and Operations, digital content platform Pocket Aces.

“Further, the ability to defer taxes on ESOPs will democratise wealth creation for startup employees,” he added.

Nakul Kumar, Co-Founder and COO, Cashify, a re-commerce marketplace, said the Budget is a step in the right direction for a more promising time to come for India’s startup environment.

“Tax reforms on ESOPs, and increase in the turnover limit for startups from Rs 25 crore to Rs 100 crore will boost the startup system and will lessen the burden from complying with complex red tapism,” said Kumar.

Budding entrepreneurs also welcomed the startup initiatives in the Budget.

“Setting up an investment clearance cell and a digital portal aimed at offering assistance to emerging entrepreneurs reflect the government’s proactive measures in further enhancing the entrepreneurial spirit. However, the details of this proposal are yet to be seen,” said Ankit Jain, Founder and JMD, Skootr.




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