Tax Benefits & Incentives for Indian Startups & Entrepreneurs


Digging deeper into tax policies and staying on par with the latest updates is a sure shot way to success for any entrepreneur, more so, when the government is trying hard to attract the growth of more startups in the country. Union Budget 2016-2017 came as a welcoming change for Startups. It unleashed a number of concessions and exemptions in order to boost the startup ecosystem in the country. Let’s have a look at some of the best features of the policy.

  1. In order to help startups in their initial stage by providing them with the necessary financial boost, the government has decided to set up a fund with an initial corpus of Rs. 2,500 crore and a total corpus of Rs. 10,000 crore over a four-year period. This will not be a direct investment but will come under the ‘Fund of Funds’ clause regulated by the Securities and Exchange Board of India (SEBI).
  2. Apart from Minimum Alternate Tax (MAT), Startups are also exempted from paying the Capital Gains Tax that is currently pegged at 20% for other businesses.
  3. Section 56(2) (vii) (b) of The Income Tax Act was amended to incorporate yet another relief to startups, i.e., the abolition of tax on Angel Investment. Under this, funds that have not been registered under Venture Capital will not be taxed. However, in order to avail this benefit, a startup has to be qualified by the Department of Industrial Policy and Promotion (DIPP) and has to have a certificate of eligibility by the Inter-Ministerial Board of Certification.
  4. 12% of the startup cost will be saved with the provision of the Employee Provident Fund (3 years).
  5. Entrepreneurs belonging to the SC & ST caste will gain added benefits to encourage more growth among the lower classes. Additionally, Startup India also promised women entrepreneurs belonging to this category an allotment of 500 crores.
  6. Encouraging entrepreneurship in the road transport sector by making amendments in the Motor Vehicles Act.
  7. Entrepreneurs living on rent will enjoy the increase in the deduction from 24,000 to 60,000 in 80GG.
  8. Unlisted firms have an advantage of lowered capital gains (2-3 years).

These changes were made in the Union Budget 2016 – 2017 as a result of the Startup India and the Make in India Scheme to provide relief for budding entrepreneurs as well as create more job opportunities for the youth.


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