Top 9 Take-ways and More for Start-ups from Union Budget 2021

Union Budget 2021 has been one of the most non-conformist financial budgets that the current crop of the workforce and business owners have seen in their active years as taxpayers and contributors to the country’s economy.

The recovery budget after the pandemic year claims to have a laser-sharp focus on the development, healthcare, and overall infrastructure of the country. It plans to disinvest several government assets to deal with the fiscal deficit. Absolutely no tax rebate has been announced for the working class. Dealing with a fiscal deficit of 9.5% to bring it down to 6.8% by 2022 is going to be an uphill task and would require resilience and solidarity for every citizen of the country. As per economic surveys, the country will be chasing a projected GDP of 11% with particular emphasis on health, infrastructure, and job creation.

Given the scenario, the only glimmer of hope that the common man is trying to latch on to is the government’s promise to boost several industries and entrepreneurial ventures that would create more jobs. The budget has some significant mentions of start-ups. In this article, we will graph the possible ways that will help the start-ups to flourish in the upcoming financial year and how that will in return boost employability in the country.

A Conscious and Affirmative Initiative towards the Digital Economy

The very first thing that was noticed by media, industrialists and common man alike was Finance Minister Nirmala Sitharaman’s presentation of the Union Budget 2021 in a ‘Made in India’ tablet instead of the bahi khata. The message came loud and clear that digitisation is going to be the anchor for us in our drive for recovery from the pandemic-stricken recession and also in our tryst to build an ‘Atma Nirbhar Bharat’.

Definition of Small Business Redefined

The finance minister has proposed revising the definition of the Company Act, 2013 for small businesses. The proposed definition will see a hike of the paid-up capital threshold from Rs. 50 lakh to Rs.2 crore. This reform would have a direct impact on over two lakh companies who can now benefit from the relaxations and incentives enjoyed by small businesses.

Start-ups to enjoy a Tax Holiday

Union Budget 2021 has extended the tax holidays for the start-ups with an annual turnover less than or equivalent to Rs.25 crores, by another year till March 31, 2022. Former and late Finance Minister Arun Jaitley had declared a tax holiday for three out of seven years, for start-ups in the Union Budget 2017. This was applicable for start-ups that were incorporated in 2016.

Among other attempts to boost the growth of start-ups in India, one significant move has been the extension of the time limit to qualify as a start-up to avail of the tax holiday. Businesses registered for seven years with an exception for the Biotechnology sector (time limit extended for 10 years) would be eligible for this tax benefit. The eligibility criteria also entail that the businesses should not be split from any existing business.

Capital Gains Tax Exemption

First-time investors for start-ups will benefit from the capital gains tax exemption. The eligibility period has been extended by one year. There is a positive sentiment among businesses hoping that the time limit is extended indefinitely to boost the growth of start-ups in India.

This tax benefit will be extended to angel investors, families, funds, and incubators without being registered as venture capitalists for investing in start-ups in the next year. This step is trusted to augment investor’s sentiments that would eventually boost the growth of the bootstrapped start-ups in this time of economic crisis. Further, the minimum shareholding has also been relaxed from 50% to 25%, which comes as a welcome respite for investors and start-ups alike.

Money earned from selling residential properties would also be eligible for tax exemption provided the amount is invested in a start-up. This is also included now for the exemption on capital gains. This benefit can be enjoyed by individuals and Hindu Undivided Families who can invest 50% of the capital gain from the sale to buy equities of eligible start-up enterprises in India. The tax on long-term capital will be exempted in case the shares are not sold till five years from the time of purchase.

One Person Company

Several business enthusiasts have brilliant business ideas but refrain from coming forward because of complicated compliance parameters. The concept of One Person Company (OPC) is ideal for them. In Budget 2021, the government has decided to incentivise OPCs by removing the restriction on turnover and paid-up capital. The government has also decided to remove the residency parameters, making it open for even the Non-resident Indians to start OPCs in India. Through this, the government only aims to open avenues to boost the growth of businesses in all forms and functionalities in India.

Rs.15,700 crores Allocated for MSMEs

The government has allocated a budget of Rs.15,700 crores to boost the growth of MSMEs for the financial year 2021-22. The duties on plastic builder wares and steel screws are planned to be raised from 10% to 15%. Further, rationalising the exemption on import of duty-free items is also on cards. This is expected to boost the export businesses that deal in garments, handicrafts, and leather items. The government also plans to lift exemption on the import of certain types of leather to boost domestic production of high-quality leather by Indian MSMEs. To help MSMEs to deal with financial debt incurred in the pandemic year, the government plans to strengthen National Company Law Tribunal (NCLT) framework.

Boost for Fintech Companies

Given the rise in digital payment, the government has allocated a budget of Rs.1,500 crore for the promotion of digital payments. This will give an added boost to the fintech companies that are operating within this space. Further, from the user’s perspective, this would make life easy for people on both sides of the transaction to save time in paying and receiving money so that they can focus on more productive work that would help their revenues to grow.

A world-class fintech hub close to Gandhinagar (Gujarat) at GIFT City (Gujarat International Finance Tac-City) is also in the offing. The government also plans to set up development financial institutions (DFI) with a budget of Rs.20,000 crores to provide credit access for SMEs and MSMEs working on manufacturing and infrastructure. Besides, business owners from scheduled caste and tribes, agriculturists, and women entrepreneurs can avail credit access for their businesses with the monetary requirement reduced from 25% to 15%.

FDI in Insurance

The government plans to amend the Insurance Act, 1983, and increase the permissible limit of FDI in the insurance sector from 49% to 74%. This will facilitate the inflow of foreign currencies in India. Not only will foreign investors bring in money in the form of investment, but they will also bring in innovative products that will boost the acceptability of insurance policies in India. It has also been indicated that these companies will have the majority of the board of directors to be Indian residents, 50% of the directors as independent directors, and a fixed percentage of the profits will come under general income. This initiative is expected to generate a mammoth earning opportunity as well as boost entrepreneurship in India.

E-governance Through MCA-21 Portal

The finance minister has proposed automating and upgrading the Ministry of Corporate Affairs (MCA) portals with the help of artificial intelligence, machine learning, and data analytics. Braced with Artificial Intelligence MCA-21 portal with version 3.0 has been rolled out and is expected to meet several business objectives such as monitoring the online compliance, ease of doing business, and e-adjudication, among others. Besides, MAC-21 also shares significant information for companies, investors, and regulators. Filling of IT-returns will henceforth be done through this portal.

Upgraded Fisheries

Government plans to set up upgraded fish lands and fishing harbours in Kochi, Chennai, Visakhapatnam, Petuaghat, and Paradip to support start-ups in aquaculture. Further, the duty for imported fish feed has been raised from 5% to 15% so that domestic feed producers get the opportunity to flourish. There is also a proposal for boosting seaweed production by setting up a Multipurpose Seaweed Park in the state of Tamil Nadu.

Further and More…

Besides all the above points, the bulk of investment in healthcare, commissioning the integrated healthcare portal, digitisation of agriculture marketplace, electrification of railways, initiatives towards National Education Policy will together enhance business opportunities in a manifold manner.

Also Read:

1) All About Union Budget 2021
2) Budgeting Tips for Managing Your Money in 2021
3) How To Decide A Startup Budget For Your Business?
4) How to Start a Wine Business? Investment, Tips & More

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FAQs

Q. What was the budget allocation for healthcare in Union Budget 2020?

Ans. Union Budget 2020 has allocated Rs.54,000 crores for healthcare.

Q. What is the budget allocation for deep-sea exploration?

Ans. A budget of Rs.4000 crores has been proposed for deep ocean missions.

Q. What is the budget for the education sector?

Ans. A budget of Rs. 99,300 crores have been allotted for the Education sector coupled with initiatives to boost FDI in this sector as well.

Q. What is eNAM?

Ans. eNAM is an electronic trading portal that brings together all the existing APMC mandis from all over India intending to support, boost and build a unified marketplace for all agricultural commodities.