The government of India is currently reviewing start-up regime to make it more attractive for entrepreneurs, especially on the tax front. Sources said the discussions are already underway and involve several ministries. It was initiated ahead of Prime Minister Narendra Modi's meeting with several start-ups and their CEOs in Hyderabad this week. Blooming businesses or ideas have been a major push for the concurrent administration as they are seen to not just be creating jobs, but also encourage entrepreneurship.
Sources said a major chunk of the agenda involves minor changes in the taxation policy. There are however, concerns related to the taxation policy for a large number of angel investors, that face a levy on the capital gains. Nasscom attributed a 53 per cent decline in angel funding recently during the first half of 2017 to complicated tax rules. During this period, venture capital and angel funding put together increased by 167 per cent. “For the last two years the government has agreed that it needs to be done... There have been some concerns about misuse (of the provisions). But the fear of misuse is there for any law,” said Nasscom president R Chandrashekhar.
There are also concerns over the rules for taxation of employee stock options, which have been flagged and the government is looking into it. An official said, “The idea is to make the regime as attractive as possible and the concerns are sought to be addressed at the earliest. The issue of start-ups being taxed on the investments received is far from over. While an exemption is provided to investors registered with Sebi and to foreign investors, domestic investors in general have to still defend the valuation. In fact, it continues to be common for companies to receive notices asking for a justification of the premium received,” said Abhishek Goenka, India Leader, Corporate and International Tax at consulting firm PwC. While the tax changes are unlikely before the budget, scheduled for February 1, some of the procedural issues can be fixed earlier if they only require change in rules through notifications
