Budget 2019-20: The vision, which the previous government in April this year and echoed by President Ram Nath Kovind in June to have 50,000 startups in India by 2024, today received a booster shot. The ease in regulatory compliance from the finance minister Nirmala Sitharaman as she presented Modi 2.0’s first union budget found resonance among the startup ecosystem.
The finance minister announced that startups and investors that have filed required documents with the taxman along with the information about the returns won’t be scrutinised pertaining to the valuation of the share premium.
Moreover, pertaining to the issue of establishing the identity of investors and the source of funds, Nirmala Sitharaman announced an e-verification mechanism to ensure that to avoid further enquiry from startups from the Income Tax department.
“The alleviation of regulatory friction has opened the way for the smooth progress of the country’s start-up ecosystem,” said Saurabh Srivastava, chairman & co-founder, Indian Angel Network adding that “this will allow us to not only meet but exceed the target of 50,000 startups stated by The President, create millions of jobs, contribute to economic growth and find innovative solutions to the country’s many challenges.”
50,000 startups in India by 2024 was envisioned by the Department for Promotion of Industry and Internal Trade (DPIIT) in April this year while announcing ‘Startup India Vision 2024’ document to boost the startup ecosystem.
The finance minister also said proposed special administrative arrangements by Central Board of Direct Taxes for pending assessments of startups and redressal of their grievances. Also, the minister extended the benefit for startups not requiring to justify the fair market value of their shares issued to investors in AIF category-I to Category-II AIF as well. Startups will now no longer be subjected to tax scrutiny of the valuation of shares issued to these funds.
“With this, FM Nirmala Sitharam has addressed the regulatory elements that currently harass both start-ups and angel investors. A robust implementation of the proposed measures should eliminate virtually all the issues plaguing the angel investment landscape,” added Srivastava.