In the 2021 budget, which is built on the 6 pillars of development, the Union Finance Minister Nirmala Sitharaman has made several announcements for startups and MSMEs. The plans are designed considering the difficulties faced by entrepreneurs following COVID-19.
The tax deduction for startups has been extended to March 2022. The capital gains exemption also extended for another year. “To promote startups, the government has decided to postpone the tax holiday till March 31, 2022,” the finance minister said. The Margin Money Requirement for startups will be reduced to 15% from the current 25%. As per the statistics of December last week in 2020, India has 41,061 government-approved startups. Of that, 39,000 startups employ 4,70,000 persons, says the economic survey. India, which has 38 unicorns right now, is the third biggest startup ecosystem in the world. Out of them, 12 unicorns formed in 2020.
Broadening the definition of startups, relaxing restrictions, granting income tax breaks and setting up the Rs 10,000 crore fund by SIDBI will help the sector.
The budget has several announcements that encourage entrepreneurs. The definition of a small company under the Companies Act will be changed. Its capital base of Rs50 lakh will be increased to Rs2 crore. The non-bank financial sector will also be strengthened.
Double tax exemption for NRIs is another advantage. The tax audit limit has been raised from Rs 5 crore to Rs 10 crore.
There are no changes in income tax rates and slabs. Those above the age of 75 are not required to file income tax returns. The exemption is applicable only for those with pension and interest income. A committee will be formed to look into income tax disputes. The income tax assessment time limit has been reduced from six to three years. The number of people filing IT returns rose to 6.48 crore from the 3.31 crore in 2014.
The union budget has allocated Rs 15,700 crore for MSMEs. In the last budget, it was Rs 7,572 crore. Although COVID-19 affected all areas, it was MSMEs that hit the rock bottom. The sector was affected by the cash shortage due to the lockdown, the supply crisis and the accumulation of arrears.
The government will encourage the entry of one person company (OPC) or individual companies. Expatriates can also start such companies. Only one member is required to form an OPC. This will put an end to the requirement that companies must have at least two members to form.
Paid-up capital is unconditional. The single owner will have full control over the company. The share transfer is permitted. It will have the same legal status as other companies. Companies will be allowed to switch to any other form in the future.
Digital payments will be strengthened with a Rs 1,500 crore project. A world-class fintech hub will be set up in Gujarat to develop innovative financial technology services and products. This will create about 1.5 lakh jobs for the youth.
The budget also says that Rs 20,000 crore will be earmarked for setting up development financial institutions to provide loans to MSMEs and businesses operating in the manufacturing and infrastructure sectors.
