In a fresh move to make things easier for the Indian startups with respect to the funding problem, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed a new income tax regulations to promote budding entrepreneurs, reported Inc42.
The new proposed income tax regulations are a part of ‘Startup India Vision 2024’, which aims to set up 50,000 new startups and 20 lakh jobs by 2024.
As per the sources, the DPIIT has suggested amendments in two sections of the Income Tax Act. First is the Section 54GB, under which DPIIT recommends that the entrepreneurs will not be liable to pay taxes on the capital gain on transfer of residential property if the money is used to fund startups.
The Startup India Vision 2024 has been set up by DPIIT to help Narendra Modi-led government to boost startups in India. The programme aims to set up new startups and create jobs to boost the Indian startup ecosystem even further.
The change has been recommended keeping in mind that numerous entrepreneurs are forced to sell their properties to fund the startups due to lack of funds.
Moreover, as an apart of amendment in Section 54, the government also suggests that founders’ shareholdings requirements should be reduced from 50 per cent to 20 per cent.
Secondly, the startup should be able to carry forward and set off of losses in the case of certain companies under Section 79 of the Act.
DPIIT recommends that the requirement to hold 100% shares for carrying forward losses should be reduced to 26%, which will encourage investors to invest in startups.
Under the initiative, the government plans to set up 500 new incubators and accelerators in India by 2024.
Furthermore, DPIIT has also proposed to set up an ‘India Startup Fund’ with a corpus of INR 1,000 Cr for high technology startups and another INR 1,000 Cr as a part of incentives.
Also, the DPIIT has also recommended a reduction of Goods and Service Tax (GST) rates, tax exemption from employee stock ownership plans (ESOPs) and exemption of angel tax on all investments by Alternate Investment Funds.