India mulls easing tax on startups

17 Jun 19

India’s government is considering introducing tax sweeteners to encourage startups and boost entrepreneurship.

The department for promotion of industry and internal trade (DPIIT) and revenue department have discussed a package of new tax measures in the forthcoming budget, reported The Economic Times.

The news comes after New Delhi signalled it will impose retaliatory tariffs on US products following Washington’s withdrawal of trade privileges for the country.

On 5 July India’s finance minister Nirmala Sitharaman is due to present the first budget since prime minister Narendra Modi won re-election in May’s general election.

Proposed tax measures to boost entrepreneurship said to be under discussion include simplified rules for taxing employee stock option schemes – seen as a key way for startups to retain staff – sources told The Economic Times.

The DPIIT is also reportedly discussing extending “angel tax” benefits to certain alternate investment funds and exempting fund managers based in India of some goods and services taxes.

Encouraging startups to boost growth and employment has been a key plank of the economic policy pursued by Modi.

In 2016 his government launched Startup India in an effort to nurture the creation of innovative new companies with the support of a range of incentives such as exemptions from income tax for three years and from certain capital gains taxes.

By the end of last year 14,036 companies had been recognised as startups under the programme, entitling them to range of government support and services.

Government measures have also sought to encourage the creation of research parks and urged state governments within India’s federal system to develop their own startup policies.

Meanwhile, New Delhi has signalled that India will impose retaliatory tariffs on 28 US products – including almonds, apples and walnuts – following Washington’s withdrawal of key trade privileges for the country, Reuters reported.

Earlier this month President Donald Trump scrapped trade privileges under the Generalized System of Preferences for India – the man beneficiary of a scheme allowing duty-free exports to the US of up to $5.6bn.

Washington’s refusal to exempt India from higher steel and aluminium tariffs last year incensed Modi, who has taken a tough line in response to growing US protectionism.

Trade between the two countries was worth about $142bn in 2018, and India is the largest overseas market for US almonds.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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