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‘Tax holiday on start-up ESOPs to benefit only a few’

New Delhi, Feb 3 (IANS) The budget announcement of a five-year tax holiday on employee stock ownership plans (ESOP) for start-ups would benefit less than 250 out of around 50,000 startups in the country, according to community-based social media platform LocalCircles.

Urging Finance Minister Nirmala Sitharaman to make changes to benefit majority of the startups, LocalCircles, in a letter to her on Monday, said: “India currently has approximately 50,000 start-ups and approximately 27,000 are registered under DPIIT Startup India programme. If we go by the section 80-IAC (as mentioned in the Budget 2020 document), less than 250 start-ups operating in the country that are recognised by the IMB (Inter-Ministerial Board), will be eligible for this benefit.”

“This would mean that 99.5 per cent of the Indian start-ups will not be able to avail of the ESOP benefit announced in Budget 2020.”

It said that ESOP taxation at date of sale should be extended to all start-ups registered under Startup India. In the event that an additional validation or declaration is needed like the angel tax declaration, the same may be instituted, the letter added.

It also sought that the criteria for ESOP taxation be kept as date of sale and the other two conditions of making ESOP taxable 5 years after the exercise date or exit of an employee from the company be removed.

Presenting the Union Budget 2020-21, Sitharaman on Saturday said: “To boost start-ups, 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 government also announced that start-ups with turnover of up to Rs 100 crore will enjoy 100 per cent deduction for three consecutive assessment years out of 10 years.

–IANS

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