KWs- Startups, Startup India, Budget 2016

On February 29^th, Arun Jaitley, our finance minister announced the third Union Budget in the lower house of Parliament. PM Narendra Modi’s proclamation that the year of 2016 will be for startups has been going around in all the news channels since last January. PM Narendra Modi is all set to give the country and economical booster, and he has rightly recognized startups as the perfect means for it. He is of the opinion that India is yet to discover her full potential, and had announced a ‘Startup India’ campaign to help the prospective entrepreneurs climb up the competition ladder

Current Business Environment of our Country:

Our country witnessed a host of startups crop up in the last decade. Flipkart, Snapdeal, Zomato, InMobi and the like, are the most accomplished of the lot. These firms came up the hard way, groping about in the dark, as startups were looked down upon until a few years ago. The government hardly held their hands.

This is no surprise given the fact that our country is not very encouraging to new businesses or ideas- must have something to do with the conservative nature of most Indians. Sadly, our country is not a great space when it comes to doing business either. Out of 189 countries, we rank 155^th in terms of ease of starting a new business and 130^th, in terms of conducting business. So it is high time our government took a hint and did the right thing.

How the Government is trying to help?

The economy of a country depends on its emerging businesses and how well they learn to cope with the market. Lack of new business would put every nation in a rut, so it is imperative for our government to buck up and build new platforms for new entrepreneurial activities. It is true that many startups that are reaping profits today are run by self-made and hard-working founders and employees. But many firms with great pitches and wise founders are forced to turn into wallflowers due to many reasons, out of which one is insufficient funding.

The Startup India campaign was kick-started to tackle exactly this hurdle. PM Narendra Modi announced this venture to catalyze our entrepreneurial sector and encourage the newbies who are taking baby steps in various businesses. The government has offered many incentives, which include a Rs.10,000 crore corpus for innovation-driven enterprises, a Rs. 500 crore per year credit guarantee mechanism, a three-year exemption from paying taxes and a break from paying capital gains tax for startups. But given our country’s deranged system, it is unclear as of how many startups would actually be able to avail these incentives.

Requirements to be fulfilled by startups:

So what are the criteria the new firms have to meet to reap these benefits? Let’s take a look at our government’s definition of a ‘startup’ eligible for the said incentives. It states that a company must be in existence for up to five years and its turnover should not exceed Rs.25 crores, and that it should be working towards development of innovative services and products. The startups also need to obtain a certificate from the respective authority to qualify.

Points to be reconsidered by the government:

Startups usually tend to have flexible work atmospheres, so these criteria seem too straight jacket for them.

Another important point is how the three year exemption from paying taxes would help no one, as most startups take more than 5-7 years before they start reaping profit. It would be helpful if the government could come up with some special taxing system that would apply only to startups, during their initial period.

The next fact that should be brought into the light is how infrastructural giants are cushioned by years of exemptions from paying tax. Wouldn’t it make more sense if this incentive was provided to the firms which actually need it the most?

Our nation bombards its business persons with taxes like electricity taxes and property tax and many more. It would be wise from the part of the government to give the startups some leeway by wavering some of these taxes.

Even the 10,000 crore fund and 500 crores per year credit guarantee system come with many strings attached, which makes it difficult for majority of the startups to take advantage of them.

It would also be a colossal help to the startups if the government could allow a tax deduction of 20% of the money they have doled out as payroll and incentives to its employees during its fledgling years.

The government should also provide startups new opportunities to take part in trade shows and workshops so that they can constantly project themselves to the public and learn from their experienced counterparts.

In conclusion, though it is clear that our government is trying to help, it is necessary that it offers help in such a way that the companies can avail them.