Budget 2017: Decoding the Impact on Start-ups

NEW DELHI, February 27, 2017 /PRNewswire/ --

The theme of the Budget, as articulated by the Finance Minister, is to transform and energise the country and the economy - as well as a much cleaner economy. How the year ahead will play out will depend on growth in the major economies, fresh investment by Indian companies, and spending by consumers and the government.

The Budget laid emphasis on digitization of tax administration, use of IT systems to reduce human intervention and e-assessment ensuring transparency and timeliness.

Ultimately, the Budget turned out to be in line with the government's vision and policies so far. It had several announcements impacting start-ups directly and indirectly. Analysis of such provisions as made by Neeraj Bhagat, Chartered Accountant and Founder of Neeraj Bhagat & Co. are as under:

Amendments having direct impact: 

1. Reduced corporate income tax 

2. Relief for small traders and businesses opting for presumptive taxation and having non-cash receipts 

3. Extension of time period for availing income tax benefits under Startup India Initiative 

4. Carry forward of losses for companies whose shareholding has changed considerably 

5. No capital gains on conversion of preference shares to equity shares 

6. Extension of time limit for use of MAT credit 

7. Penalty for late filing of income tax returns 

Amendments towards 'ease of doing business': 

1.Tax on indirect transfer in case of certain foreign portfolio investors 

2. Provisions relating to domestic transfer pricing have also been relaxed, so as to cover only those companies which are claiming profit-linked deductions or exemptions.

3. FIPB or the Foreign Investment Promotion Board has been done away with, leading to more emphasis on foreign direct investment (FDI) through the automatic route.

Amendments to boost digital economy and curb black money:   

1. Cash payment for expense or acquisition of asset of Rs 10,000 or more not allowed  

2. Cash receipt of Rs 3,00,000 or more would attract 100 percent penalty

A new Section 269ST has been proposed, to bar cash receipt or Rs 3 lakh or more in a single day, or against a single bill or against a single occasion or event, attracting a penalty of the same amount.