Budget 2018: Tax incentives, faster clearances needed for start-ups to grow

Start-ups in the digital arena, particularly the financial technology domain, want from Finance Minister Arun Jaitley more initiatives to promote digital transactions and provide sizeable incentives

India’s start-up ecosystem has seen rapid growth over the past few years. At present it has reached a stage where it could be said have matured enough be called one of the very important cogs in the Indian economy’s wheel. According to industry players, the country’s start-ups need only a bit of a push in the form of certain incentives, particularly when Finance Minister Arun Jaitley present the Narendra Modi government’s final full Budget in this term on February 1.

Jaitley should consider in the upcoming Union Budget 2018-19 giving start-ups some impetus with tax incentives and faster procedure clearances, suggests Avinash Tiwari, co-founder & director of pCloudy, a software testing startup.

“We are expecting the tax holiday period would be increase from three to seven years. Considering the slump in valuations in subsequent rounds of funding by start-ups, we look forward to the government providing necessary clarity for invoking anti-abuse provisions on taxation of issue of shares at higher than FMV,” Tiwari says.

He further adds: “We at pCloudy feel that the cash flows are an important building block for start-ups. If the TDS rate deductions by the customers of startups can be reduced to 1-2 per cent in the initial 3-5 years of start-ups’ business cycle, it will prove a big boost to the start-up ecosystem.”

As for start-ups mainly in the digital arena, particularly in the financial technology domain, there is a need for more initiatives to promote digital transactions and provide sizeable incentives to fintech firms in India.

"In the upcoming budget 2018, fintech firms that have partnered with banks and the ones that are implementing healthcare projects should be given increased incentives such as tax holiday for initial three years and tax rebate, among other things,” says Shailendra Naidu, CEO of OBOPAY.

Besides, Naidu says, fintech firms have not been brought within the purview of government’s schemes such as Mudra and credit guarantee schemes. “To foster economic growth, we recommend that the upcoming Budget revises Mudra and other existing credit guarantee schemes to cover fintech firms as well," he says.

"While the recently declared relaxations in GST rates are a welcome measure, we suggest that the government make norms for refunding the GST ‘input credit’ to taxpayers in time. Provisions should also be made for paying reasonable interest if the refunds are not made according to timelines,” says Naidu.