By Hrishikesh Datar.With Prime Minister Narendra Modi’s “Start-Up India Stand Up India” campaign to be unveiled tomorrow, Vakilsearch’s Hrishikesh Datar, shares some insights into the legal changes that ought to be introduced and the future of startups in India in 2016..One of the goals of the Start-up India Stand up India campaign is to ease the regulations imposed on start-ups, thereby aiming to move India up the ladder in ease of doing business. This has been proposed as start-ups this year are projected to be the next big employment generator in India..Improved regulations such as ease of compliance, reliance on self-certification, tax exemptions for startups and others, will allow entrepreneurs to devote their time and energy to scale up their business models. Through the new policies the government is not only trying to increase the number of start-ups, but is also working to increase the number of women entrepreneurs in the country. It is offering new credit facilities to women entrepreneurs at lower rates..In the midst of an overflow of young entrepreneurs, with brilliant ideas, looking for results sooner rather than later, India is considered as the youngest start-up nation in the world. This is excellent news in terms of innovation within the country, but the flipside of this scenario is that these entrepreneurs soon shift base to international platforms because of India’s stringent tax regimes. This is why one of the most awaited changes to be made for 2016 is the probability of enhanced tax deduction on expenses start-ups incur on training provided to employees..Start-ups have also been demanding an exemption on the income from sale of equity, as these proceeds are reinvested in securities of new start-ups which provide tax benefits for these serial entrepreneurs, who sell one start-up to found another. Also, the increase of start-ups helps in generating more employment opportunities in the country. Aside from this there may be an exemption of paying service tax for the first three years due to slow inflow of revenues..Talking about funding, start-ups with sustainable business ideas get high valuations that are often based on their revenue potential and technologies that are under development. These points are often difficult to explain to the revenue department, with the inevitable result of high taxes. Thus a suggestion made by entrepreneurs was to exempt start-ups from these taxes; there is also a need to remove the existing angel tax..In the advent of these new schemes by the government, big technology companies are thought to be willing to set up funds to support start-ups as well. Under this new initiative, entrepreneurs can expect to see a plan for creating special training institutes and R&D facilities to support their businesses..Entrepreneurs are also expected to see a change in the definition of ‘a start-up’. Broadly speaking, this new definition would ease start-up association and new businesses or ones that have existed for not more than five years with revenue of up to Rs 25 crore will be treated as start-ups provided that they are engaged in the development or commercialization of new products, processes or services driven by intellectual property and technology..Ideally, there should also be some responsibility imposed on the private banking sector. For example, private banks may be asked to provide the least applicable rate of interest and to give loans between INR 10 Lakh to INR 1 crore to at least one ST/SC and to at least one woman entrepreneur..At this present moment, only speculations can be made on the actual effects that this policy will have and it remains to be seen if the 2016 Policy will be bold enough to make some real changes in the start-up ecosystem of India..In addition, each individual state will need to push this campaign; it should not be assumed that these opportunities will be given only to entrepreneurs in some cities and not all over the country..Hrishikesh Datar is the Founder and CEO of Vakilsearch
By Hrishikesh Datar.With Prime Minister Narendra Modi’s “Start-Up India Stand Up India” campaign to be unveiled tomorrow, Vakilsearch’s Hrishikesh Datar, shares some insights into the legal changes that ought to be introduced and the future of startups in India in 2016..One of the goals of the Start-up India Stand up India campaign is to ease the regulations imposed on start-ups, thereby aiming to move India up the ladder in ease of doing business. This has been proposed as start-ups this year are projected to be the next big employment generator in India..Improved regulations such as ease of compliance, reliance on self-certification, tax exemptions for startups and others, will allow entrepreneurs to devote their time and energy to scale up their business models. Through the new policies the government is not only trying to increase the number of start-ups, but is also working to increase the number of women entrepreneurs in the country. It is offering new credit facilities to women entrepreneurs at lower rates..In the midst of an overflow of young entrepreneurs, with brilliant ideas, looking for results sooner rather than later, India is considered as the youngest start-up nation in the world. This is excellent news in terms of innovation within the country, but the flipside of this scenario is that these entrepreneurs soon shift base to international platforms because of India’s stringent tax regimes. This is why one of the most awaited changes to be made for 2016 is the probability of enhanced tax deduction on expenses start-ups incur on training provided to employees..Start-ups have also been demanding an exemption on the income from sale of equity, as these proceeds are reinvested in securities of new start-ups which provide tax benefits for these serial entrepreneurs, who sell one start-up to found another. Also, the increase of start-ups helps in generating more employment opportunities in the country. Aside from this there may be an exemption of paying service tax for the first three years due to slow inflow of revenues..Talking about funding, start-ups with sustainable business ideas get high valuations that are often based on their revenue potential and technologies that are under development. These points are often difficult to explain to the revenue department, with the inevitable result of high taxes. Thus a suggestion made by entrepreneurs was to exempt start-ups from these taxes; there is also a need to remove the existing angel tax..In the advent of these new schemes by the government, big technology companies are thought to be willing to set up funds to support start-ups as well. Under this new initiative, entrepreneurs can expect to see a plan for creating special training institutes and R&D facilities to support their businesses..Entrepreneurs are also expected to see a change in the definition of ‘a start-up’. Broadly speaking, this new definition would ease start-up association and new businesses or ones that have existed for not more than five years with revenue of up to Rs 25 crore will be treated as start-ups provided that they are engaged in the development or commercialization of new products, processes or services driven by intellectual property and technology..Ideally, there should also be some responsibility imposed on the private banking sector. For example, private banks may be asked to provide the least applicable rate of interest and to give loans between INR 10 Lakh to INR 1 crore to at least one ST/SC and to at least one woman entrepreneur..At this present moment, only speculations can be made on the actual effects that this policy will have and it remains to be seen if the 2016 Policy will be bold enough to make some real changes in the start-up ecosystem of India..In addition, each individual state will need to push this campaign; it should not be assumed that these opportunities will be given only to entrepreneurs in some cities and not all over the country..Hrishikesh Datar is the Founder and CEO of Vakilsearch
