Each and every entrepreneur in India should acquaint themselves with the tax benefits they will receive under the Start-up India scheme, regardless of their experience. These tax benefits would help them to save money and instead invest in the expansion of business operations.
Tax can be referred to as the compulsory amount imposed upon an individual by any given country's government. Union budget of 2016-17 in India introduced drastic changes in the taxation policies concerning start-ups. These changes were presented with the intent to promote entrepreneurship in the country under the Start-up India policy. That being that now entrepreneurs would be able to avail the many tax exemption and concessions from the government while also leverage the availability to file GST return online.
Now, let us look into some of the tax benefits that entrepreneurs in India would get the following
#1. Tax holiday for the period of 3 years.
With the intent to provide the thrust to entrepreneurial ventures, the government in the union budget of 2016-17 introduced a deduction of 100 % tax exemption during its first 3 years of operation. Only companies registered as a start-up under the DIPP (department of industrial policy and promotion) functioning in the areas such as deployment, innovation, development, or commercialization of new services and products driven by technology can avail the tax benefits for 3 years.
Additionally, those start-ups eligible in the first 3 years are not obliged to pay any tax for profits except minimum alternate tax (MAT), calculated on the 'book profit.'
#2. 20% exclusion on capital gains.
Capital gains are the taxes charged on profits generated from the sale of capital assets such as bonds and stocks. Recently, the government has included a provision concerning the exemption of 20% on capital gains tax. This provision was long overdue as the start-ups have demanded it for a long time. Before the inclusion of this particular provision, most Indian start-ups were forced to route their investment via Mauritius as the investment's capital gain tax from there abandoned stated provisions in the double tax avoidance treaty betwixt both the countries.
#3. Tax imposed on turnovers.
The government charges 25% tax plus cess and surcharge on new manufacturing entities/firms. Nonetheless, companies with turnover not more than Rs. 50 crores annually are obliged to pay 29% tax. Medium and small companies with turnover not exceeding Rs. 50 crores are taxed at a 25% rate. Furthermore, the claiming period of profit-linked tax exemption has now been raised from five years to seven years. This change by the government will surely benefit 6.67 lacs companies in the country, roughly speaking.
#4. Payment on EPF (employees' provident fund) imposed by the government.
The government now give EPF (employees' provident fund) benefaction of 8.33% for 3 years. Earlier, the percentage of the benefaction was 12% of employees' basic salary. This change would assuage many employees by trimming start-ups' costs by 12% for the successive 3 years and would offer opportunities to recruit qualified candidates for their company as candidates would have job security. Many companies have now initiated a process to start registering themselves with EPFO (employees' provident fund organization) to obtain the benefits mentioned above.
#5. Presumptive tax.
The entrepreneurs must keep and maintain their books of account up-to-date while also acknowledging various types of GST returns. Nonetheless, beneath the presumptive taxation scheme, it is not mandatory to maintain the books of account of the company and thus, this would minimize the burden of the entrepreneurs. Anyone whose earned income rests at 8% is eligible to avail of the benefits of this scheme.
Nonetheless, for a person whose income merely exceeds 8%, the higher rate can be declared. Furthermore, all the small businessmen with a turnover of up to Rs. Two crores and professionals with their gross income of up to Rs. Fifty lacs are eligible and can avail of the benefits of this scheme.
All the policies mentioned above fall under the 'start-up India' campaign launched by the government and were introduced in the union budget of 2016-17. These policies were put into place with an intent to provide much needed thrust to the emerging entrepreneurial ventures.
It is the second scheme of the 'Make in
India,' and it aspires for generating more jobs for the youth within the
country, which has a huge demographic potential. And this start-up tax policy
would surely help the government to realize their dream of making the Indian
economy of 5 trillion.
