In India, a large number of startups, and small and medium enterprises (SMEs) were surveyed by LocalCircles, an online forum for citizens engagement, and it was found that startups and entrepreneurs are concerned about corruption and bureaucratic hurdles as more bigger challenge then raising funds.
According the survey, startups in the country view corruption or bureaucratic inefficiencies, securing loans and funding as major challenges in 2019.
Based on response from over 15,000 startups, SMEs and entrepreneurs, the survey found 45% respondents fear corruption or bureaucratic inefficiencies as the top challenge foe them in 2019, while 37% feels securing loans as top challege, followed by fund-raising with 37% respondent opting for it. For 18% respondents business growth was on top.
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The Survey report said, “Angel tax is one area that falls under corruption and bureaucratic inefficiencies as it takes the focus of startup entrepreneurs away from building a product or service to responding to tax notices and filing appeals, something that startups can clearly do without,”
Several startups and angel investors have, in the recent past, raised concerns over notices received from the income tax authorities related to taxation of angel funds. The government has also set up an expert committee to look into all the taxation issues faced by startups and angel investors.
The study highlighted that 38 per cent of the respondents said they had received at least one notice.
“Angel tax continued to be a key pain point for startups where the assessing officers in many cases reject the valuation method utilised by the startup and instead treat the capital raised as income from other sources, thereby, raising a tax demand and penalty on the startup,” it added.
Also, majority of the respondents said they feel there is an urgent need for the income tax authorities to be educated on startup valuations.
LocalCircles, on behalf of thousands of startups had raised the issue with the Department of Industrial Policy and Promotion (DIPP) and Central Board of Diret Taxes in late December 2018.
“…though an order was issued to not take coercive measures to recover the demand, assessment orders continue to be issued against startups,” it added.
In 2017, Indian industry body FICCI had suggested in its report that Indian startups need support from government to lessen the number of failures and revealed that startups success rate is not up to the mark in the country.
In the same year, a study by IBM titled ‘Entrepreneurial India: How startups redefine India’s economic growth’ has reported that ‘unethical business conduct’ is the major cause behind the failure of Indian startups.
Source – Times of India