Budget 2019 and what it means to Startups

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As an entrepreneur myself, I was looking forward to what this budget has in store for startups. I can confidently say that my entrepreneur friends were eagerly watching the election results and now for the budget for similar reasons. This budget has brought out a few things that startups can really look up to. A lot of thought seems to have gone into giving startups a much-needed push as this will go a long way in achieving the government’s Make in India program.

• To encourage the growth of start-ups, firms who provide requisite details in their returns will not be subject to scrutiny under angel tax on share valuations. This should bring a sign of relief to many startups that are trying to raise funds. This should also remove the anxiety from the angel investors who were not too sure of investing. On angel investor with who I had a conversation some time back said that he was holding off from investing due to the confusion around angel tax.
• There’s now 100% FDI in insurance intermediaries — this is a classification that most insuretech startups fall in. My first startup as some of our may be aware was an insuretech one. This would be a welcome reform as this insurance is one section that needs to usher in a lot of innovation. Most of India’s fintech startups have either been in the fintech space or in the credit space. This reform should encourage more entrepreneurs to enter the insurtech space too.
• Funds raised by startups will no longer require scrutiny by the tax department. In addition to this, the period of exemption from capital gains from the sale of the startup has also been extended.
• We should soon have a dedicated TV program on national broadcaster Doordarshan. Designed by the start-ups themselves, the channel is aimed at being a platform to match venture capitalists with emerging start-ups. This will get many of us watching DD channel after a long time I guess. Quality and variety of content should be key. I hope this also encourages many private broadcasters to join the bandwagon. I would love to watch an Indian version of the “Shark Tank” or “The Pitch”. Yes we have had one series before, but it was no where close in the quality of the interactions.
• We can all look forward to special arrangements by the Central Board of Direct Taxes (CBDT) for pending reviews and cases related to startups. In a press release post the budget CBDT’s chairman had stated “Forget about taxman; focus on business”
• The 2016 ‘Stand up India’ scheme — aimed at encouraging entrepreneurship among women and marginalised segments of the society — will be further extended between 2020–25.
• The streamlining of labor laws, education, and focus on the rental housing segment should also impact the start-up movement positively.

I personally felt that it could have addressed a few more areas to make it easy for startups:

• While Startup India gave some relaxation on income tax for startups, I felt that some relaxation on GST could also have been given.
• Shared economy startups like mine, face many more tax and GST related challenges. It would have been great for the government to come up with specific norms on income tax and GST for early stage ecommerce and shared economy startups.
• It was surprising for me to see that coworking providers and incubators were not talked about in this budget. This segment of the real estate industry provides the foundation for many startups to get going on their aspirations. Government could have brought out specific reforms to ensure that quality infrastructure is available at affordable costs to startups
• Startups face a tough challenge in getting their first set of customers. Certainly the government and large corporates are unapproachable to early stage startups. The government could also have brought out reforms to encourage government departments and corporates consume the services or products from startups.

This budget covered many new areas and more importantly showed the commitment that the government has to startups. Really looking forward to how these norms get implemented and how the Startup India program gets the necessary focus from all government departments. I am much more confident that India would remain one of the top ecosystems around the world for startups. This budget has ensured that the initiative begun in the previous tenure of the BJP government gets the much needed push into the current term.