Background: The Union Budget was announced on 5 July 2019. Tulika Singh from Lexstart iterates some special announcements made for startups and the MSME sector in the budget.

The following are the highlights of the Union Budget 2019 for startups and MSMEs.

STARTUPS

Tax relief for investors in startups: Measures are proposed to carry forward and set off losses for startups and increase in period of exemption of capital gains from sale of residential house for investment in startups up to March 2021.  

Angel Tax clarification: Startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium. A mechanism of e-verification will be put in place and with this, the funds raised by startups will not require any angel tax scrutiny.  

Helping skilled entrepreneurs: 80 livelihood business incubators and 20 technology business incubators to be set up in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industries.  

TV channel: Finance Minister announced a TV channel exclusively for startups.  

Social enterprises startups: Electronic funding platform for social enterprises to give necessary impetus to startups.  

Also read: 5 essential things to remember as your grow your business

MSMEs

Loan incentive to MSMEs: Government to provide loan of up to INR 1 crore to MSMEs.  

Incremental loans: In continuation to bolstering MSME sector growth, interest subvention of 2% has been announced for fresh or incremental loans.
 

TAX

Angel Tax relief for Cat II AIFs: Valuation of shares issued to Cat II AIFs shall also now be out of scrutiny of Income Tax evaluation (earlier it was only for Cat I AIF).  

TDS above 1 crore: The government proposes to levy TDS of 2% on cash withdrawal exceeding INR 1 crore in a year from a bank account.  

Surcharge on Individuals: In view of rising income levels, a surcharge will be levied on individuals with taxable income of INR 2 to 5 crore, and INR 5 crore and above.  

Corporate Tax rate: Lower rate of 25% corporate tax rate shall now be applicable to companies with a turnover of up to INR 400 crore (increased from previous threshold of INR 250 crore).  

Also read: Budget impact: Taxation on businesses

OTHERS

PAN and Aadhaar to be interchangeable: PAN and Aadhaar to be interchangeable; now Aadhaar can be quoted instead of PAN, wherever PAN is required. It is okay to not have a PAN.  

Labour Laws: Proposal to streamline multiple labour laws into a set of 'four labour codes'.  

Rental housing: Current archaic rental laws to be updated to assess relation between lessor and lessee in a fair manner.  

Annual global meet: The Government is contemplating organising an annual global meet to get all three sets of global players: Industrialists, corporate leaders, corporate sovereign and venture funds.  

Platform to raise capital: The Government proposes to work on a platform for listing social enterprises and voluntary organisations to raise capital as equity, debt or units like mutual fund.

Also read: Budget impact: Key deductions & benefits under income tax for individuals

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