New Delhi, January 15, 2017

DIPP pushes for easing of eligibility norms, a longer tax break, focus on fintech firms

With less than a dozen start-ups managing to qualify for income-tax sops since the launch of the ‘Start-Up India’ campaign last year, the Centre has received proposals to ease the eligibility norms and increase the tax benefits.

The Department of Industrial Policy & Promotion (DIPP), which has been asking the Finance Ministry to allow older start-ups to qualify for the sops and increase the number of years for income-tax exemption from three to seven, has made a renewed plea.

“If the objective of the ‘Start-Up India’ scheme is to encourage such companies and in turn boost entrepreneurship and employment generation, the government must give a clearer signal and show its intent to qualify more start-ups for incentives,” said an industry source.

It has also asked for other incentives such as flexibility in taxation on ESOPs for start-ups, and regulatory easing.

Few beneficiaries

“Of the total applications received for tax benefits, 111 applications were considered as only these start-ups were incorporated after April 1, 2016, and eight start-ups were approved for availing tax benefits,” a DIPP official told BusinessLine.

Income-tax exemption for three years in a block of five years for start-ups is one of the most lucrative incentives in the package that was announced. But, the DIPP feels it is inadequate.

The DIPP has also made a case for less stringent qualification requirements for start-ups to participate in government procurement, greater flexibility in taxing ESOPs for such ventures and also easier exit norms, the official added.

Easing expected

Indications are that the Finance Ministry could make an announcement on easing eligibility norms in Union Budget 2017-18. “Increasing the number of years for tax incentives may not be possible as the government is working to prune the list of exemptions,” said the source.

An additional focus area for the government could be start-ups in financial technology as part of its efforts to encourage cashless payments and use of digital payment means.

“A start-up needs time to establish itself and earn profits. Under the current provisions, by the time the income tax exemption will be of some use to the start-up, the period of exemption would be over,” he said.

[The Hindu Business Line]