Interim finance minister Piyush Goyal outlined significant measures to ease the farmers’ condition in the country. The Interim Budget 2019 also comes with tax benefits to the middle-class exempting those with an annual income of ₹5 lakhs from paying taxes altogether.
However, Mr Goyal has not delivered any major decision related to the startups. The much demanded and awaited “Angel Tax”-issue was never mentioned by the finance minister. In comparison, the Budget 2018 discussed a lot of benefits and measures for the evolution of the Indian startup ecosystem.
While this is still the Interim Budget, which may or may not is implemented (the government may change in the upcoming General Election), here are some key points that every startup founder and entrepreneur should have a knowledge of.
Huge Opportunity Ahead for Defence Startups
Piyush Goyal announced a defence budget of ₹3.05 lakh crores ($43.57 billion) which is the highest of all time. This creates a huge opportunity for a startup working in the defence sector. It is ₹20,000 crores ($2.86 billion) more than the earlier budget of ₹2.85 lakh crores ($40.71 billion).
Additionally, the government has also launched Defence India Startup Challenge on August 4, 2018. It was a joint initiative of the Atal Innovation Mission, the Department of Promotion of Industry and Internal Trade (DIPP) as well as the Defence Innovation Organization (a ministry of defence initiative). It aimed to encourage startups to innovate defence solutions in 11 categories.
Tax Relief to Startups and SMEs
The Budget aims at digitalizing and electronifying all tax assessment and returns processing within the next two years. This will help users get return benefits within 24 hours. Moreover, it will omit the manual intervention from tax officers and reduce malpractices and harassment faced by individuals and companies.
For startups, the threshold limit for presumptive taxation is raised from ₹1 crores to ₹2 crores. For small professionals, the benefits of presumptive taxation are extended for the first time fixing the threshold limit at ₹50 lakhs. Overall compliance processes are simplified.
Benefits for Entertainment Startups
Filmmakers and digital content creators will get a single window clearance that will enable easy shooting of films. Till now, the service was available to international filmmakers and artists. Regulatory provisions will reply more on self-declaration going forward, he added.
Piyush Goyal also introduced anti-camcording provisions in the Cinematograph Act to control the prevailing piracy. This will help in protecting the intellectual property rights and boost OTT (Over The Top) companies like Netflix, Amazon Prime, Hotstart, Zee5 and others.
Hope for Space-tech Startups
The interim finance minister announced that India will be the launchpad in the world with the Gaganyaan Mission. The aim is to place an Indian astronaut in space by 2022. This will enable private players in the space-tech sector to boost.
As of now, the space tech startups are struggling to get funding from private investors. A recent report suggested that the Indian Space Research Organization (ISRO) has cancelled the contract of Team Indus as of Jan 19, 2019. This measure by the government may induce hope into the space startups in the country.
Sourcing from SMEs, Women-led Businesses
The government plans to source 25 per cent material from Small and Medium Enterprises (SMEs) and 3 per cent from only women-led enterprises. Furthermore, AI-based technology will be introduced to uplift the MSME sector. Piyush said that nine AI-portals will be introduced without providing much clarity on the timeline.
The commitment to source materials from small businesses will bring up more small businesses and increase their revenue which will directly impact the sector. Furthermore, initiatives like Loan under 59 Minutes have decreased the turnaround time from months to within an hour for loan approval.
Scope For Startups In Animal Husbandry
Farmers involved in the animal husbandry business will receive 2 per cent subsidy on interest on loans taken for evolving their business. The incentives will be passed on through the Kisan Credit Card scheme. An additional 3 per cent subsidy will be given to those who pay the instalment in time.
This particular move in the Union Budget 2019 will help the farmers involved in animal husbandry increase their income and boost their businesses. This will indirectly and positively affect the startups in the agritech and animal husbandry sector as more and more farmers will join the digital revolution.
PPP model for Healthcare Startups
The world’s largest healthcare program – Ayushman Bharat have benefited 10 lakh people. It further aims to benefit 50 crore people. Poor families were able to save ₹3,000 crores. Furthermore, the government aims to double government expenditure on healthcare from 1.15 per cent of GDP to 2.5 per cent of the GDP by 2025.
This will enable hospitals, healthcare firms and digital health-tech startups reach more people and provide healthcare facilities on the basis of PPP models. However, private sector firms are worried about the increasing medical inflation and lack of clarity on the budget for the health insurance program.
Consumer Startups Will Benefit
Piyush Goyal announced that the minimum taxable income of individuals has been increased to ₹5 lakhs which were ₹2.5 lakhs earlier and the standard deduction has been raised to ₹50,000 from ₹40,000. Middle-class people with investments and savings can get a tax exemption of up to ₹6.5 lakh per year.
The initiative will surely increase the purchasing power of the middle class as it would save an estimated ₹23,000 crores of 3 crore small and middle-class taxpayers. Consumer startups can witness a boom in their sales and revenue as middle-class people will be able to purchase more goods.
No Mention of Angel Tax
Several entrepreneurs and angel investors demanded to remove the draconian angel tax provisions and bring transparency into the process of angel funding. However, the demand by the startup community did not receive much light in the Interim Budget session. Piyush Goyal did not mention anything related to the Angel Tax.
Digital Villages & Internet-based Startups
The government is looking forward to creating around 1 lakh digital villages in the next five years. This will result in increased smartphone and internet penetration in the rural and suburban areas. Rapid digitalisation and electrification of the villages will increase the standard of living of people residing in these areas.
Combine it with the tax exemptions and you will find that consumer and internet focused startups will benefit from the decision. The digital transformation will help urban startups tap the rural segment in perhaps all sectors, especially digital payments and e-commerce.
Steps to Promote Artificial Intelligence
The Interim Budget comes with a part of a section titled “Empowering Youth To Fulfil Their Potential”, a national program on artificial intelligence. Much details about the number of funds allocated for the same was not clarified in the speech. However, this will embark the development of technology.
Combined with other initiatives like Digital India, Startup India and Make in India will help India establish itself as a digital and technological society. The IT-service sector in India contributes around 50 per cent to the GDP of the country. The opening of 9 AI-research centres will surely increase the skills of Indian developers and help the economy grow.
No Initiatives about Electric Vehicles
For the last 4 years, there was a lot of buzz about electric vehicles and creating a supportive ecosystem to enable electric vehicles. However, the government did not discuss any new initiatives related to EVs.
Some states like Telangana, Rajasthan, Karnataka and Tamil Nadu has developed policies for EVs and are attracting investments from the private sector. Piyush Goyal touched the point on electric vehicles as only the need to clean up Mother Earth.