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Government may modify its tax Holidays for startups

On January 16, the government disclosed its package for startups, it has declared the arrangement of initiatives for startups, including a Rs 10,000 crore funds, patents and relaxation from income tax on their profits for the first three years. Also ,more benefits are also expected in the budgets announcements in 2016-2017.

It also declared one more important which is likely to enlarge the extent of the three year holiday as there is broad consent that startups usually don’t make any profits in the first three to five years-  something which C A Gupta, partner with Deloitte Haskins & Sells, Underlines. “When we talk of start-up ecosystem, it is about large sums of money and we would like the government to make the ecosystem larger, more friendly. The rollover benefit should not only be limited to the fund of funds set up by the government but they should also be allowed to put the money into other funds or alternative investment funds that are putting money in start-ups,” Amarjeet Singh, Partner-Tax at KPMG, said.

One another expectation of the startups is the relief anti-avoidance rule under tax laws in the budget. Up till now, the anti-avoidance rule describes that if there is any change in the shareholdings of company in excess of 51 %, then the company is not permitted to carry forward its losses. “Start-ups go through multiple round of funding and also incur losses in the first few years. So, some enabling exemption should be carved out for start-ups to ensure that their tax losses don’t lapse even if there is a change in shareholding multiple times in the initial years,” Singh wrapped up.

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