The Start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. This has been proposed in the Union Budget 2019-20 presented by the Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman in the Parliament today with a view to resolve the so-called ‘Angel Tax’ issue.
In her Budget speech, the Finance Minister said that the issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department, she said.
The Minister said that in addition, Special Administrative arrangements shall be made by Central Board of Direct Taxes (CBDT) for pending assessments of start-ups and redressal of their grievances. “It will be ensured that no inquiry or verification in such cases can be carried out by the Assessing Officer without obtaining approval of his supervisory officer”, she added.
At present, start-ups are not required to justify fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). The Finance Minister proposed to extend this benefit to Category-II Alternative Investment Funds also. Therefore, valuation of shares issued to these funds shall be beyond the scope of income tax scrutiny, she added.
The Finance Minister proposed to relax some of the conditions for carry forward and set off of losses in the case of start-ups. She also proposed to extend the period of exemption of capital gains arising from sale of residential house for investment in start-ups up to 31.3.2021 and relax certain conditions of this exemption.
TV Programme Exclusively for Start-ups within the DD Bouquet of Channels
Besides the above tax benefits, the Finance Minister also proposed to start a television programme within the DD bouquet of channels exclusively for start-ups. This shall serve as a platform for promoting start-ups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning. This channel shall be designed and executed by start-ups themselves.
Mega Investment in Sunrise and Advanced Technology Areas
In order to boost economic growth and Make in India, the Finance Minister said that the Government will launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as Semi-conductor Fabrication (FAB), Solar Photo Voltaic cells, Lithium storage batteries, Solar electric charging infrastructure, Computer Servers, Laptops, etc. and provide them investment linked income tax exemptions under section 35 AD of the Income Tax Act, and other indirect tax benefits.
The Stand Up India Scheme has been extended upto the year 2025. This was stated by the Union Minister of Finance and Corporate Affairs, Smt Nirmala Sitharaman while presenting the Union Budget 2019-20 in the Parliament today. “Stand-Up India Scheme has delivered enormous benefits. The country is witnessing emergence of thousands of entrepreneurs from women and also from the Scheduled Castes and Scheduled Tribes, most of them assisted to set up their businesses and industry with capital provided under the Stand-Up India Scheme”, she said. The Minister said that banks will provide financial assistance for demand based businesses under this scheme, including for acquisition of scavenging machines and robots.
The Finance Minister said that the Government also proposes to streamline multiple labour laws into a set of four labour codes which will ensure the standardisation and streamlining of the process of registration and filing of returns, which is further expected to reduce the disputes.
Highlighting the achievements of the Government in the field of skill development, the Finance Minister said that through the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), the Government enables about 10 million youth to take up industry-relevant skill training. To prepare the youth for the future and also to take up jobs overseas, the Government will increase focus on skill sets needed abroad including language training, the Minister explained. She also added that focus shall be given to new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country, and offer much higher remuneration.
“Make in India”, with particular emphasis on Micro, Small and Medium Enterprises, is one of the major focus areas of the Union Budget this year. Delivering her budget speech in Parliament today, Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman announced various proposals aimed at strengthening the sector.
For ease of access to credit for MSMEs, Government has introduced scheme for providing of loans upto Rs. 1 crore within 59 minutes through a dedicated online portal. Under the Interest Subvention Scheme, Rs. 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
The Finance Minister also announced the Government’s intent to create a payment platform for MSMEs to enable filing of bills and payment on the platform itself to eliminate delays in government payments.
The Finance Minister further informed that the Government has decided to extend pension benefit to about three crore retail traders and small shopkeepers whose annual turnover is less than Rs.1.5 crore under a new scheme named Pradhan Mantri Karam Yogi Maandhan Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar and a bank account and rest will be on self-declaration.
The Finance Minister also announced that under the Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) 100 new clusters will be set up during 2019-20 enabling 50,000 artisans to join the economic value chain. SFURTI aims to set up Common Facility Centres (CFCs) to facilitate cluster based development to make traditional industries more productive, profitable and capable for generating sustained employment opportunities. Focused sectors are Bamboo, Honey and Khadi clusters.
The Minister further announced that the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) would be consolidated for setting up of 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs)in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
The Budget says that the Government will support private entrepreneurships in driving value-addition to farmers’ produce from the field and for those from allied activities. Dairying through cooperatives will be encouraged by creating infrastructure for cattle feed manufacturing, mild procurement, processing and marketing.
The Union Budget has also made proposals under indirect taxes to promote Make in India, that may also benefit the MSME sector. For example, to provide domestic industry a level playing field, basic Customs Duty is being increased on items such as cashew kernels, PVC, Vinyl flooring, tiles, metal fitting, mountings for furniture, auto parts, certain kind of synthetic rubbers, marble slabs, optical fibre cable, CCTV camera, IP camera, digital and network video recorders etc. Exemptions from Custom Duty on certain electronic items which are now being manufactured in India are being withdrawn. End use based exemptions on palm stearin, fatty oils, are being withdrawn. Exemptions to various kind of papers are being withdrawn.
