Budget 2021: FM extends tax holiday, capital gains exemption for startups

Experts say since most startups are loss making, tax holiday will have limited immediate impact on them

Finance Minister Nirmala Sitharaman on Monday extended the tax holiday for startups by another year to March 2022 while presenting the annual budget. Along with this, capital gains exemptions have also been extended for startups by another year.  

According to experts, since most startups are loss making, tax holiday will have limited immediate impact on them. 

“The government has always focussed on boosting the startup ecosystem, attracting investments and creating jobs. But as we know most startups are loss making, so tax holiday has limited immediate impact,” said Ankur Bansal, Co-founder and Director, BlackSoil.

“Capital gains is exempt currently for angels for DPIIT recognised startups. This is an extension for FY22 which is welcome and should be continued for attracting investments into startups from HNIs and VC funds,” said Anup Jain, Managing Partner, Orios Venture Partners.

The government announced some other direct and indirect measures in the Budget for the startup ecosystem. “Direct measures that will have a positive impact on the ecosystem include OPC (one-person company) reforms and setting up of a Fintech hub in GIFT city. Indirect measures like massive increase in healthcare spending, higher capex, infrastructure building and reducing some stress in the banking and financial system will also be a net positive for startups and the VC ecosystem,” said Jatin Desai, managing partner, Inflexor Ventures.