In the Budget 2020, the Finance Minister highlighted the growth of entrepreneurial activities in the country and called start-ups as “engines of growth for our economy”.

1. Government Funding: The government would provide seed and early stage funding to start-ups.
2. ESOP Taxation Deferred: Recognising the need of attracting and retaining talented employees in these start-ups, the FM proposed to reduce the burden of taxation on the employees by deferring the tax payment on exercise of Employee Stock Option Plan. Presently, the options are taxable as perquisites at the time of exercise. The proposal provides for deferred tax payment on the exercise of options by five years or till they leave the company or when they sell their shares, whichever is earliest.
3. Tax Incentive: Presently, an eligible start-up is allowed deduction of 100% of the profits for three consecutive years out of seven years if the total turnover does not exceed Rs. 25 crores. This tax benefit is proposed to be extended to larger start-ups by way of increase in the turnover limit from Rs. 25 crores to Rs. 100 crores along with extending the period of eligibility for claim of deduction from the existing 7 years to 10 years.
4. Start-ups in Infrastructure: The Budget has also proposed that infrastructure agencies of the government will involve youth-power in start-ups. The start-ups would help in rolling out value added services in quality public infrastructure for citizens.

Read more on the budget here.

This post has been contributed by Ms. Vaneesa Agrawal and Ms. Sanyukta Srivastav.

[DISCLAIMER:  This article is for academic purpose and is solely to provide readers with general information regarding developments in Indian law. The information contained herein does not constitute legal or a professional advice.]