You are here: Home » Economy & Policy » News
Business Standard

DPIIT proposes relaxation in income tax law to help start-ups raise funds

As part of easing regulatory requirements for start-ups, the DPIIT has recommended amendments in Section 54GB and and Section 79 of the Income Tax Act

Start-ups  |  Income Tax  |  Income Tax Act

Press Trust of India  |  New Delhi 

startup, start-up
Photo: Shutterstock

With a view to facilitate by start-ups, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed relaxation in the laws pertaining to sale of residential properties and carrying forward of losses, sources said.

These suggestions are part of 'Startup India Vision 2024', prepared by the DPIIT for the new government to promote growth of budding entrepreneurs, who face difficulty in raising finances.

As part of easing regulatory requirements for start-ups, the DPIIT has recommended amendments in Section 54GB (capital gain on transfer of residential property not to be charged in certain cases) and Section 79 (carry forward and set off of losses in case of certain companies) of the Act.

It has suggested changes in Section 54GB of Act to exempt proceeds on sale of residential properties from capital gains tax if it is used to fund a start-up.

"Budding entrepreneurs often sell their residential properties to support their business activities," one of the sources said.

As part of the amendment of this section, it has also proposed to reduce founders' shareholding requirements from 50 per cent to 20 per cent and mandatory holding period from 5 years to 3 years as it would enhance flexibility of founders to raise capital by selling the properties.

Regarding Section 79, it suggested relaxation in shareholding requirements to carry forward the losses.

"Start-up promoters presently need to hold 100 per cent shares for carrying forward of losses. The requirement needs to be reduced to 26 per cent, as it will encourage new investors to invest in start-ups," they said.

DPIIT, under the commerce and industry ministry, has also proposed other measures such as tax incentives to promote budding entrepreneurs as part of the vision document.

The document aims at facilitating setting up of 50,000 new in the country by 2024 and creating 20 lakh direct and indirect employment opportunities.

The other proposals include setting up of 500 new incubators and accelerators by 2024, 100 innovation zones in urban local bodies, deployment of entire corpus of Rs 10,000 crore Fund of Funds, and expanding funding to incubators.

Startup India, the flagship initiative of the government, was launched in January 2016 and intends to build a strong ecosystem for the growth of start-up businesses to drive sustainable economic growth and generate employment opportunities. The Startup India action plan provides tax and other incentives.

So far, as many as 18,151 have been recognised by the department.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, May 05 2019. 12:10 IST