Nasscom's budget wishlist seeks no taxes for startups

IT industry body says move would reduce compliance burden and reduce cash outflows

National Association of Software and Services Companies (Nasscom), apex body representing the information technology (IT) companies, has asked for removal of all kinds of taxes currently levied on startup companies in the upcoming Budget 2016-17.

"Startups be exempted from direct and indirect taxes including MAT (Minimum Alternative Tax), a move that would reduce compliance burden and reduce cash outflows. Further, there is an urgent need to remove angel tax that serves to tax the capital receipts, when the availability of financing from recognised sources such as banks and venture capital funds is unavailable," R Chandrashekhar, president of Nasscom said in the budget wishlist submitted to the Finance Ministry.

He further added that the companies may be allowed to carry forward losses even if there is change in ownership structure in lieu of capital infusion in the entity.

As the funding for startup comes primarily from non-resident Indians, Nasscom said there should be streamlining of capital gain tax rules for both domestic and non-resident investors.

"Harmonise capital gains tax for resident investors with non-resident investors and tax rates for angel investors," it suggested.

The industry body also said that capital gains tax on income from sale of equity of a startup should be exempted if the proceeds are reinvested in securities of a new startup.

Last year, several state governments had initiated plans to tax e-commerce transactions saying they do not pay local value added tax despite doing business in their territory. Nasscom said there is a need to look into creating policies on the backdrop of emerging technologies.

"There are disturbing trends whereby states are considering taxing e-commerce transactions.Nasscom proposed a high level committee to evaluate of emerging trends and technologies, which should be should be institutionalised to provide inputs and triggers for policy roadmap.