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Budget 2016-17 – What it has for Start Ups

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Key Changes Ø  100%deduc3onofprofitsfor3

outof5yearsundersec3on80-IACTosupporttheeligiblestart-ups,100%deduc3onfromprofitsderivedbystartups,whichareinthebusinessofinvolvinginnova3on,development,deploymentorcommercializa3onofnewproducts,processesorservicesdrivenbytechnologyorintellectualproperty,isprovidedfor3outof5years.However,thecondi3onofincorpora3onbetween01.04.2016and31.3.2019isintroduced.Thus,thestartupsincorporatedbefore01April2016cannotavailthisbenefit.

Ø  NocapitalgainforinvestmentinunitsofSpecifiedFundundersec3on54EEToincen3vizeandsupportstartups,aspecifiedfundisproposedtobeestablishedbytheGovernment.Withregardtothesame,itisprovidedthat,incaseapersonhaslongtermcapitalgains(fromanyasset),whichisinvestedintotheunitofthesaidfund,thenlongtermcapitalgainsearnedbyanypersonwouldnotbesubjectedtotax.Keycondi3onsaretheexemp3onforlimitedtoRs.50lacs,subjecttothecondi3onthatamountwouldremaininvestedforatleast3years.Further,amountshouldbeinvestedwithin6monthfromdateofaccrualofthegains

Ø  Nocapitalgainoninvestmentineligiblestart-upundersec3on54GBLongtermcapitalgainarisingfromtransferofresiden3alpropertyshallnotbechargedtotax,iftheamountofgainisinvestedinsubscrip3onofsharesofacompanyqualifiedtobeaeligiblestartup,withcertainotherspecifiedcondi3ons

Ø  Reducedrateof25%fornewmanufacturingcompanyincorporatedonora[er1.3.2016Topromoteandestablishnewcompanies,anincen3vizedrateoftax@25%isproposedforthecompaniesincorporatedonora[er1.3.2016,andengagedonlyinmanufacturingac3vity

Ø  Taxincen3veforgenera3onofemploymentundersec3on80JJAAUnderexis3ngprovisions,addi3onaldeduc3onof30%forwagesofnewemploymentcreatedareavailabletoaanIndiancompany,derivingprofitsfrommanufactureofgoodsinafactory.Withaviewtogenerateemployment,nowthesaidbenefitof30%excessdeduc3onismadeavailabletoallassesseewhoaresubjecttotaxaudit.However,itisstatedthatinordertoenablethesmallerunitstoclaimthisincen3ve,itisproposedtoextendthebenefitunderthesec3ontounitsemployingeven50insteadof100regularworkmen.Further,condi3onofminimumworkingdaysforemploymentisalsoreducedfrom300daysto240days.However,thisdeduc3onisavailableinrespectofemployeeswhosemonthlyemolumentsdoesnotexceedRs.25,000

FelixAdvisoryInnova&ngfinancialsolu&ons

Key Changes Ø  Addi3onaltaxonhighearner

dividend@10%undersec3on115BBDAGovernmenthasproposedtolevytheaddi3onaltax@10%ontheamountofdividendreceivedbyanIndividual,HUForFirmwhoisresidentofIndia,iftheamountofdividendexceedsRs.10Lacs.Tillnow,dividendsweretaxexemptinthehandsoftheshareholders.Thesamemayimpacttaxcostforseedcapital

Ø  Ra3onaliza3onofprovisionsofTDSbyloweringtherateofTDSfrom10%to5%forCommissionorBrokerageundersec3on194HTDSrateforcommissionandbrokeragehasbeenreducedfrom10%to5%.

Further,aggregateannuallimitforpaymenttocontractorisalsoincreasedfromRs.75,000toRs.100,000

Ø  Equaliza3onlevyof6%onnonresident

Withtheincreasinggripofonlineadver3sementcompanies,andIndiabeingabigmarketforthem,therehavebeenasharpriseofrevenueofsuchcompaniesfromIndia.Sincenoelementoftheperformanceoftheservice(adver3sing)isexecutedinIndia,thesaidincomecannotbeabributedtotheopera3onsinIndiaandduetononexistenceoftheirPermanentExistenceinIndia,notaxisapplicableonthesaidincomeinIndia.

Giventheabove,anaddi3onallevy@6%,inthenameofEqualiza3onlevy,isbeingleviedonspecifiedservices(i.e.onlineadver3sement,anyprovisionfordigitaladver3sement,digitaladver3sementspace,oranyotherfacilityforonlineadver3sement),whichareavailedbyIndianresidentfromnonresidentprovider.Aseparatechapterisintroducedforthislevy.Thiswilltakeeffectformthedateappointedintheno3fica3ontobeissued.ThesaidlevywouldbeontheIndianservicerecipient.However,thesaidcondi3ondoesnotapplywherethepaymentdoesnotexceedRs.1lacinafinancialyear.Thesaidprovisioncouldhaveanimpacttothetuneof6%ononlineadver3sementbudget

Ø  [email protected]%,onalltaxableservices,w.e.f.1June2016.Proceedswouldbeexclusivelyusedforfinancingini3a3vesforimprovementofagricultureandwelfareoffarmers.Inputtaxcreditofthiscesswillbeavailableforpaymentofthiscess.Toincreasethetaxbasefromservicesectorandtosupportruraleconomyanaddi3onalcesscalledKrishiKalyanCessisproposedtobelevied@0.5%onalltaxableservices.Thesamecanincreasetheinputcostforstartups

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