Start-ups likely to get tax benefits in Union Budget 2017

DIPP forwarded demand for increasing tax holiday period for start-ups to 7 years from 3 years

The Modi government’s Startup India programme could get a boost in Budget 2017 as the Department of Industrial Policy and Promotion (DIPP) is compiling a list of tax concessions on employee stock options (ESOPs), unlisted securities and convertible instruments for the sector.

Under the DIPP’s proposal, ESOPs for start-ups should be taxed at the time of sale, when they have the greater liquidity to pay taxes and the instruments get a fair valuation. Further, DIPP has proposed that the period of long-term capital gains for unlisted securities be reduced from the current limit of 24 months, given that making investments in start-ups is risky and subject to a higher rate of tax.

The DIPP has also forwarded the demand for increasing the tax holiday period for start-ups to seven years from three years to the finance ministry. 

To increase the availability of finance for start-ups, the DIPP is also finalising the guidelines for a credit guarantee fund scheme, reported The Economic Times.