Much like the Startup India initiative, the Union Budget 2017 has left the Indian startup community asking for more. Be it a 5 year tax holiday or the profit linked-deductions for start-ups are benefits which are virtually redundant. This is because there is a long gestation period for them to even break even, forget achieving profitability. Here are what top Indian startups think about Union Budget 2017.
Vijay Shekhar Sharma, Founder & CEO – Paytm
It is a digital economy budget. Government has pushed the digital theme in every area of the budget. Every person from a small shop to consumers is pushed towards the digital economy. Tax benefits, incentives to use digital payments and extending loans based on a digital footprint will create a larger merchant ecosystem for digital payments. Incentives for labour intensive sectors including housing, farming and dairy will help SMEs to create new jobs. Focus and attention to bank NPAs, as well as increasing bank capitalisation is great step towards strengthening the financial system of the country. Finally, the income tax rate changes will encourage more people to report their incomes and create a larger tax net for the country. Overall, it is a great budget that will encourage people to move to the formal economy and derive benefits.
Bipin Preet Singh, Founder & CEO, MobiKwik
Big digital push is the thrust of the Budget and is a very welcome and the right move for the future growth of the economy. I commend this progressive budget that invests heavily in technology and digitization. The focus on digital payments will lead to revolutionary transformation in Indians’ payment habits. Digital payments will be the new normal in 2017 and we are very excited about this. As we become more digital, India will see new taxpayers and better transparency in incomes.
Upgrading digital infrastructure to support cashless transactions in rural and semi urban areas will encourage more merchants and consumers to transact on non-cash and online platforms. However, we feel that the government must have also considered promoting startups in the digital payments and digital security areas. Secure digital transactions is the only way to sustain India’s habit of cashless payments.
The budget also promoted the startup ecosystem with tax benefits. Reduction in the corporate tax for Medium and Small Scale Enterprises (MSMEs) to 25% will also go a long way in attracting more investment in the country. It will surely give the domestic sector a massive push and indirectly help the country in restoring its healthy GDP growth forecast.
Overall the Budget proposals look to boost consumption. The impetus on affordable housing and rural infrastructure will boost lower and middle income and translate into consumption.
Nita Kapoor, Head – India New Ventures, News Corp
Much like the Startup India initiative, the Union Budget 2017 has left the Indian startup community asking for more. Be it a 5 year tax holiday or the profit linked-deductions for start-ups are benefits which are virtually redundant. This is because there is a long gestation period for them to even break even, forget achieving profitability. Had there been fiscal incentives for private sector to support the setting up of more incubators through industry academic partnerships that would have been a positive for startups in India.
Manoj Gupta, Co- founder Craftsvilla
There is nothing big bang in this Union Budget. There is very little for startups and ecommerce. Abolition of FIPB would hopefully make FDI easier. Was looking forward for the Government to take more proactive actions on areas like handloom and tourism that has huge potential for India. Would have also loved it if they announced developing handloom parks or heritage parks across the country with better facilities.
Sandeep Aggarwal, Founder, ShopClues and Droom
The Union Budget 2017-2018 is a progressive economy budget. The government has mentioned everything right from reducing fiscal deficit gap to cleaner GDP growth, expansionary nature of monetary policies to reducing the tax for income bracket of Rs 5 lakh.
Profit linked-deductions for start-ups getting reduced to 3 years out of 7 years is a big relief for the startup ecosystem. Until, last year government had given three year tax holiday and MAT (Minimum Alternative Tax) which was going to expire by 2019 and now has been extended to 7 years. However, there are a lot of things I was hoping 2017 Union Budget to touch upon for example policies to ensure that capital is easily accessible to entrepreneurs, repatriation of money coming to India, R&D credit, no capital gain for any kind of start-up sale or exit and to make foreign listing for any Indian company straightforward.
These pointers should have been addressed. Nevertheless, increasing the tax holiday from 3 years to 7 years is a welcome change and startup friendly.
I hope with the Union Budget 2017, GDP moves in an upward direction this financial year vis-à-vis calendar year 2016 which was negatively affected due to demonetization.
Sudhir Kumar, CEO, itel Mobile India
The Union Budget-2017 carries significant prospects for manufacturing brands. The FM has included provisions meant to boost electronic manufacturing by promoting MSIPS and EDF. Such policies would further receive funds worth 745 crores in FY18, hence, promoting indigenous manufacturers and attracting innovation and technology prowess engineered by foreign countries. And while the manufacturing sector celebrates policy changes, we further appreciate the streamlined delivery of these products, via the GST bill. These announcements are further in sync with the overall emphasis on transitioning India into a digital economy, empowered with fast internet access, cyber-security and access to smartphones. It is heartening to see the union budget for FY18 support the right to progress by shifting the focus back on to rural economy and agriculture; which truly resonates with our brand proposition. The provisions put forth in the budget are going to improve the buying capacity, digital lifestyles and affluence of the rural India and we at itel, welcome these changes and look forward to the promising year ahead.
Ambika Sharma- Founder & MD, Pulp Strategy Communications
The latest budget announcement holds great promise. I am particularly enthused by the hike in capital allocation for women skill development initiatives to INR 1.84 lakh crore for the 2017-18 fiscal. This move will empower women across the country and help them in becoming active contributors in the country’s growth. The allocation of INR 10,000 crore for the BharatNet project is also promising, as it will bring high-speed internet connectivity to rural citizens in nearly 150,000 gram panchayats through Wi-Fi hotspots. With nearly 70% of the country’s population living in rural and semi-urban geographies, the move will give the vision of a ‘Digital India’ a big boost.
On the business side, the reduction of corporate tax for MSMEs with annual turnover up to INR 50 crore to 25% is a very welcome move which is expected to benefit nearly 96% businesses in the industry. Given that corporate tax is one of the major expenses for the country’s MSMEs, the cut in tax rates will promote greater growth within the sector and will allow Indian businesses to become more competitive globally. Increasing the period for profit-linked deductions to three years out of seven years as against five years is also extremely positive news for the country’s entrepreneurial landscape. Since start-ups often do not generate any profits for the first few years of their operations, increasing the consideration period to seven years will benefit more start-ups and promote entrepreneurship across the country. The setting up of Payment Regulatory Board by RBI to replace BPSS (Board for Regulation and Supervision of Payment and Settlement Systems) as the regulator of electronic payments is also a promising development in the quest to become a less-cash and digital-first economy.
Abhesh Verma, COO nexGTV
I welcome the budget and appreciate the clear commitment shown by the Government towards fueling the growth of digital adaptation by focusing on underlying infrastructure. This is reflected in the availability of more spectrums and 10k crore worth of budget allocation for fiber optic laying beyond the already laid 155000 km. The availability of bandwidth will help Indians adapt to the digital lifestyle and thus, will help in the growth of the entire ecosystem. Additionally, the rebate in tax for people, especially the ones at the bottom of the pyramid will increase their in-hand disposable income a part which will also be spent on mobility, data, and entertainment, further working for the benefit of the OTT players.
Manavjeet Singh, Founder& CEO, Rubique
We appreciate the announcements made under the Union Budget 2017. We feel the budget is well rounded, covering important cores of the Indian economy, including SMEs, Rural India, Digitalization and the common, middle class citizens of India.
The budget does include certain good news for the startups. The increased period for profit linked deduction for three years out of 7 years as against five years is welcome, as start-ups are not expected to make profits for the first few years. The need was for a 10-year period, but extension to 7 years is nevertheless welcome. The exemption from MAT has however, not been allowed, and an enhanced carry over period will not really help start ups from a cash flow perspective.
Furthermore, the housing and personal finance sector has received a major boost from the announcements by the Financial Minister. The move to shift housing into infrastructure is going to enable debt and equity financing, further bringing down the costs and inspiring users to opt for the same. Besides, the income tax reductions for common people is further going to increase the buying potential or take loans for various purposes.
National housing bank will refinance loans worth Rs 20,000 cr. This is expected to increase Balance transfers especially in affordable housing segment due to strong focus on PMAY. This will also give in impetus to housing sector overall.
Double lending target of banks to Rs 2.44 lakh crore. This is primarily to bridge the existing lending gap & we see more capital available for customers specially for MSMEs.
Alok Mittal, co-founder, Indifi Technologies
The enhancement in PM Mudra Yojna and the rebate on corporate tax for MSMEs are welcome measures, which will help drive growth in the segment. Announcements of schemes on cash-back for merchants to promote digital transactions and Aadhar based POS will help MSMEs create a transaction trail that start to improve their credit worthiness.
Sudarshan Motwani, CEO, BookMyForex
The only one thing that will impact forex market is the clarity by Finance Minister that there will be no tax on long term capital gains. This will stop the flows by FIIs and hence will cool the USD-INR rates.
However, there can be capital outflows due to debt market with interest rates coming down in India and the expectation that those will firm up in US.
USD – INR pair that is trading at 67.61 down from highs of 68.25 just a few days back should stabilise between 67.7 to 68.2 range.
Pratik Seal, Group Chief Marketing Officer at AGS Transact Technology
The Union Budget 2017 has seen a host of incentives to boost India’s digital economy. However, the budget has not been a very populous one with incentives for the startup fraternity per se. Reduction of income tax for companies with a turnover of Rs. 50 crore to 25% is a welcome move, and will aid many emerging companies. The three-year tax holiday in the first seven years (extended from 5 years earlier) since inception of startups is a measure which will provide some relief to them.
Furthermore, the surcharge of 10% levied on individuals earning between Rs 50 lakh to Rs 1 crore, may impact startups in the process of scaling-up, to attract senior talent on their usual cash and ESOP/stocks packages, as the taxation gap over and under the Rs. 1 Cr mark is now practically non-existent. The instant gratification “of being in the 1cr plus CTC and still be in the sub 1 Cr tax bracket” part is effectively eliminated. One would rather demand a fatter, all cash pay-check now!
Unfortunately, no policies have been announced providing relief for the aspiring Indians in the 10-30 lac bracket while heavier taxation for 50-100 lacs is also a serious “aspiration dampener!
Adhil Shetty, CEO & Co-founder, BankBazaar
Often, for start-ups and MSMEs, the smaller funds at critical points have the potential to change their operating landscape. The budget has several provisions for start-up that can help them conserve that amount. Taxes for start-ups and small businesses have seen a dip, with the profit-linked deduction available to start-ups for 3 out of 5 years extended to 7 years now. The Income Tax for MSME up to 50cr turnover has been reduced to 25% and the presumptive income tax for enterprises whose turnover is up to Rs.2 crore has been reduced to 6% from 8%. These measures bring down the operating expenses and give start-ups a little more breathing space and room to conserve resources and grow.
The FM also mentioned potential amendments to the excise and labour laws, which could further boost ease of doing business. There is increased investment in education and skill development, which will help generate a more skilled workforce and fill a very important gap. The reforms in FDI policy have also streamlined the entry of FDI into the country, leading to a 36% increase in FDI inflow despite a 5% dip in global FDI inflows. The further FDI reforms on the cards mean that this is great time for investors to enter the country and do business with us, which could boost the start-up sector even more.
Aditya Gupta, Chairman, Quarizon
This year Union budget has some positive measures for the startup ecosystem. The increase time span to first seven years for 3 years tax deduction is a positive move as there are very few startups which are able to achieve profitability in the first few years of existence. Simplification of investment norms and more benefits to angel investors would have further strengthened the startup eco-system. Also, promoting the digital economy is a great step and this will be a boost to fin-tech startups.
Raj Bhatia , Co-Founder, GrabGuru
Union Budget 2017 acknowledged the plight of start-ups by extending the ‘tax holiday’ limit to 7 years. Despite the fact that MAT is not being removed, the carry forward limit of 15 years as against 10 years will definitely boost the start-up hopes and operations. This is a great initiative by the Government and will lead to a robust eco-system for entrepreneurs and start-ups. Further, foreign Investment Promotion Board removal and further labialization of FDI policies will help attract foreign investors and technology to be brought in by them will help Indian Startups.
Post de-monetization, the banking system has been pumped with excess money resulting into Higher landing at lower interest rates. This cycle will result into higher buying power of the consumer . Govt has lot of focus on digitalization for which new payment mods like BHIM and Aadhar pay has been promoted. To enable this across the India budget has been allocated to lay fiber optical, which will provide broadband connection to over 1.5 Laks grampanchayats. With all the steps taken by this govt it will empower the startups and the penetration of start up company will reach to rural India also.
Ritu Singh, Co-Founder, Ela, a patented fertility solution startup
Budget 2017 has brought a great boost to healthcare and digital economy. Increased government focus on health care, especially on women health which has been untouched for long, will provide a strong foundation for startups like Ela which focusses on women reproductive health. Barring cash transactions above Rs. 3 Las will entirely flip the game towards going digital for all large transactions. Also, lowering of corporate tax by 5% for MSMEs will bring cheer to all entrepreneurs. Mr Jaitley has also proposed to further liberalise the FDI policy which is an important step required to facilitate external funding and investments.
Vikram Gupta, Founder & Managing Partner, IvyCap Ventures.
The main positive aspect which I see for startups and SMEs for companies with less that 50 cr of turnover is that tax rate has been reduced from 30 to 25% which should come as a big relief for startups. Most of the startups we invest in have less than 50cr revenues.”
While changes to the tax holiday are a welcome move, most startups in the first few years of their existence do not earn a profit.
Hence increases in the concession period who have helped the startups better. Also last year only a handful of startups were allowed tax rebate hence changes to the policy to bring in more startups into this fold would have been more beneficial to the startup ecosystem.
Rajiv Raj, Co-Founder and Director, CreditVidya
The Government’s decision to enhance the digital payment infrastructure by providing incentives is a powerful move towards creating a Digital India. This will help deepen digital footprints of Indian consumers, which will in turn enable superior credit underwriting and profiling for millions of individuals who do not have access to credit at a reasonable rate, leadin g to greater financial inclusion.
We welcome the announcement of tax exemption for startups. This will benefit them significantly, and make the initial entrepreneurial journey much easier.
Charlie Lee, CEO True Balance
The government has announced a game changing budget today. Policies announced introducing internet friendly measures, additional POS terminals, mandating government receipts through digital means and benefits to UPI based payments and other digital payments will give a mega push to digital transactions and encourage cashless economy further in the country.
Sumesh Menon, Co-Founder and CEO, U2opia Mobile
The Union Budget announced today, reinstates the government’s focus on creating a holistic growth opportunity for early stage start-ups in the country. The tax holiday for startups for three out of seven years of setting up the company, will ease the business process. This will lead to a positive growth environment in which new businesses can operate and thrive, moreover it will also allow early stage startups the right kind of headway required to kick start their operations.
Devendra Rane, Co-founder & Chief Technology Officer, Coverfox.com
With this budget, the Finance Minister has rolled out measures that will indirectly but effectively contribute towards a Digital India. Aadhar-enabled payment system (Aadhar Pay), Aadhar based health cards for senior citizens, web-based platform for defence pensioners and schemes to promote BHIM app are all moving in that direction. A digitally involved India will be more open to cashless transactions, which is welcoming news for the FinTech ecosystem.
Rahul Garg, CEO & Founder, Moglix
The Union Budget 2017 is quite positive. Mr. Jaitley has nicely balanced the activities post demonetization with strong focus on rural economy and infrastructure. It’s a welcome move to reduce the corporate tax for SMEs to 25%, which will give breathing space for a significant section. Also, abolition of FIPB will ensure that there will be lesser road block for entrepreneurs to invest in the country in multiple sectors. Government has shown its decisiveness in rolling out GST, which is going to be a tax reform milestone.
Priya Mohan, Co-Founder & Executive Director – Vidyartha
I am glad to see that the Government is focusing on measurability of learning outcomes for the success of their program- while it sounds encouraging, my thought would still be on how are they going to do it? If the methodology is to test outcomes based on assessments again, then the format & the people executing it are very critical – in my opinion learning outcomes cannot be restricted again to paper performance.
Also, it is heartening to understand that the government is planning to increase online courses to increase accessibility to students – for this to work; I am sure the government would work to remove current bottlenecks and make tech infrastructure relevant right at the school levels. The students are far more tech savvy and open to learning with technology more than the pedagogy themselves – atleast in most schools in India, which is why you find ed-tech depending on schools take a longer time to scale; because of two reasons – a) limited investment towards tech infra in schools and b) a general disconnect of even basic computer skills among the school folks – this makes access through schools difficult.
While we appreciate that the government continues to bring new ideas – we are yet to see a concrete plan to rope some private enterprises doing great work in this space – Government should leverage on superior strategic and execution talent outside their gates to see the success of such initiatives.
Vipin Agarwal, Founder & CEO – OnlineTyari
De-coupling of Training and Certification (National testing agency to be established for all entrance exams, freeing CBSE and AICTE) and establishing a system to measure learning and training outcomes of skill development and school education programs should go a long way in implementing educational reforms in India. If done rightly, institutions like CBSE and AICTE should in the future focus on devising better pedagogies for training outcomes. As we wait to receive the fine print, it would be interesting to understand the government’s view on involving private agencies, especially startups, in achieving the educational and skill development reforms.”
Dr. Apoorv Ranjan Sharma, Co-Founder, Venture Catalysts
Union Budget 2017-2018 is a progressive economy budget. The government has introduced the right policies, from reducing fiscal deficit gap to cleaner GDP growth, whilst promoting digitalization and growth of the rural sector. For the Startup economy, there is a significant relief in deductions within profit-linked available to seven years from the current five years. Furthermore, the deduction in corporate tax is a great boost for the companies with turnover of 50 crores or less. Besides, SMEs with turnover up to Rs 2 crore, will enjoy tax relaxation from 8% to now 6%. The move is going to waive off the financial burden, while propelling small merchants on their path to success.
Vikram Gupta, Founder and Managing Partner, IvyCap Ventures.
The 2017 Union Budget didn’t have many sops for startups other than the MAT extension of period of carry forward from 10 years to 15 years, the challenge still remains in terms of actual cashflow for the startups.
The main positive aspect which i see for startups and SMEs for companies with less that 50 cr of turnover is that tax rate has been reduced from 30 to 25% which should come as a big relief for startups. Most of the startups we invest in have less than 50cr revenues.
On digital transactions there has been a significant boost to the entire sector. The investment in infrastructure to boost digital transactions should support the entire ecosystem. Secondly the target of about 2500 crores of digital transactions over the next 1 year facilitated through BHIM, UPI usage should be an interesting area to look at. Taxation relief for digital payment equipment manufacturers will also encourage more hardware players in the segment.
Most of the fintech companies in the space should get benefit from the increased focus of the budget on the digital payments ecosystem. The fact that cash transactions of over Rs 3 lakhs are not permitted and the cash expenses allowance is reduced to Rs 10k should benefits the online payment companies like FTCash.
Also some clarity is required with regards to usage of cash and also the incentive schemes announced for digital transactions.
Some clarifications with respect to Section 56, 68 and 115 of the Income Tax are still required and are yet to be seen in the fine print of the Budget.
Manish Goel is founder-director at Research & Ranking
The budget was not a game-changer in totality but still managed to provide some positives. Big plus was the reduction in MSME’s taxes to 25%. This move is expected to benefit more than 90% of Indian companies. The decision to increase capital expenditure by 25% is also expected to give a boost and have a multiplier effect on the economy.