Finance Bill 2018: Startups Get Relaxation In 100% Deduction of Profit Criteria

In what could be called as surprise gift for startups, the criteria for claiming 100% deduction of profits has been relaxed by govt in form of an amendment to the Finance Bill 2018, passed in Lok Sabha yesterday.

In past, startups were allowed 100% deduction of profits for any 3 out of 7 years from the year of incorporation. However, to avail this incentive, the startups were required to comply with condition which stipulated that the turnover cannot exceed ₹25 crore in 7 years from the date of incorporation.

In an amendment to Finance Bill 2018, the govt. has now linked turnover limit directly to year of claim. According to this, the compliance condition is relaxed largely to the effect that turnover should not exceed prescribed limit for the year for which 100% deduction is claimed by the startup.

The above development was first reported in The Hindu.

For last couple of years, government along with few other bodies are mulling over to create more relaxed environment for startups in India. It is to be noted that in this week only, two big relaxations have been given to startups as beside relaxing the criteria for 100% deduction of profits for startups, India's market regulator Securities and Exchange Board of India (Sebi) is also planning to allow startups to list on the small and medium enterprises (SME) platform of the stock exchanges as an opportunity to raise capital apart from usual private equity and angel investment funding route.

Earlier, in financial budget of this year, time for claiming a tax holiday/exemption by eligible startups has been extended till April 1 2021.

However, despite of all this, one thing that disgust startups in India is that, in 2015, government withdrew the tax exemption given to company/startups doing research and development or startups based on R&D, which is a great setback for innovation in the country.

With 4,750 Tech Startups, India is Now Third Largest Startup Ecosystem in the World

India's startup ecosystem, which is considered as one of the fastest startup ecosystem in the world, has added another feather to its cap. From the year 2010 to now, the Indian technology startups landscape has seen a phenomenal growth towards creation of innovative startups. It now houses 4,750 tech startups -- the highest number in the world after the United States and Britain.

Success stories like Flipkart, Big Basket, Ola etc. have been responsible for making India the third largest base of technology startups in the world.

According to industry experts, India is now seeing the emergence of a new generation of youngsters who are brave enough to capitalize on the hard-won financial security of their parents' and venture out of the mundane 9 to 5 job routine and try their luck in the risky tech startup business.

More and more young people in the second largest populated country on the Earth are now embracing the startup culture, which can be seen as a stark contrast to the previous generations of the country which aggressively endorsed employment stability above all else.

Not only is India bettering its performance every year, but it is also giving a tough competition to tech startups all around the globe. Whether it is robotics, mobile apps, self-driving tech or smart kitchens, India is competing shoulder to shoulder with all tech innovations all around the world, and is in fact in some spaces, much ahead others.

From being just an outsourcing hub for Western technology companies looking for a cheap and well educated workforce to becoming the third largest base of technology startups in the world, India has come along a long way. The country's middle class giving its young people the freedom to experiment can be seen as a major factor in this success.

According to software industry association Nasscom, by the year 2020, India could see between 200,000 and 250,000 people working in tech startups, which is nearly double the current number.

According to a recent report published by Sage, a UK-based accounting and payroll company, the Indian Institutes of Technology (IITs), which are considered premier institutes in the country, are the fourth largest producer of unicorn startups in the world.

India is currently home to 10 unicorn companies making them the poster boys of the country's startup ecosystem. From e-commerce biggies Flipkart, Snapdeal and ShopClues to restaurant aggregator Zomato, mobile adtech firm InMobi, analytics company Mu Sigma, classified ads platform Quickr, cab aggregator Ola, digital payments company Paytm, and messaging app Hike, these 10 are the members of the elite group of unicorn companies in India and almost all of them have founders from one of the IITs.

According to experts, even US President Donald Trump's latest crackdown on immigration -- including the proposed restructure of the H-1B working visas, which are often used by global tech firms to recruit foreign skilled workforce -- might work in favour of India's tech startups as the talent instead of heading out to fulfil their dreams will look to do the same on their local soil.

Well, for now, everything is surely looking up for the Indian tech startup scene.