Startup India Vision 2024: Income Tax Rebate for Founders who Sell their Properties

Aspiring entrepreneurs often sell their residential properties to support their startup ventures and keep it moving. However, according to Income Tax Act of India, capital gain on transfer of house property results in a tax liability. Seeing this as one of the much needed reforms, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed relaxation -- as part of 'Startup India Vision 2024' -- in the income tax laws pertaining to sale of residential properties and carrying forward of losses, reported Economic Times citing sources privy to the developments.

There exist a Section 54GB (w.e.f. 1st April, 2013), wherein capital gain on transfer of residential property not to be charged in certain cases that include -- Relief from long-term capital gains tax on transfer of residential property and 2) If sale consideration invested in a manufacturing small or medium enterprise.

DPIIT has recommended amendments in Section 54GB and Section 79 (carry forward and set off of losses in case of certain companies) of the Income Tax Act in order to promote growth of budding entrepreneurs, who face difficulty in raising finances.

Prepared by the DPIIT for the new government, the proposal also includes setting up of 500 new startup incubators and accelerators by 2024, 100 innovation zones in urban local bodies and expanding CSR funding to incubators.

DPIIT also proposed to facilitate setting up of 50,000 new start-ups in the country by 2024 and creating 20 lakh direct and indirect employment opportunities.

Besides, DPIIT also suggested to deploy of entire corpus of Rs 10,000 crore Startup Fund of Funds announced in 2016 and yet to have a clarity on its disbursement after three years or so.

67 Startups Have Received Tax Benefits So Far: MoS Commerce Industry

The Indian government seems to be really committed to its cause of promoting budding entrepreneurs and supporting struggling startups in the country. According to Minister of State for Commerce & Industry C R Chaudhary, the Indian government has already provided tax benefits to 67 startups so far.

It was last year that the Modi government had announced and sanctioned the much awaited Rs 10,000 crore 'Fund of Funds for Startups'. The fund is one of the steps taken by the Central government towards boosting self-employment in the country — a move that is part of a larger initiative, Prime Minister Narendra Modi’s pet project ‘Startup India Action Plan’, which he unveiled himself in the month of January last year.

Addressing the startup India states conference, Chaudhary said, “3,576 startups have been recognised as on September 7 and tax benefits have been given to 67 innovative startups."

According to Department of Industrial Policy and Promotion (DIPP), they selected the 67 startups out of the 671 startups that they were considering for income tax exemption.

Chaudhary also assured that he will ensure that the chosen startups get full support and facilitation from both the centre and state governments. He said, “We are here to support you. Whenever you need any assistance or help, we are there for that."

The minister also took the occasion to encourage budding entrepreneurs in the country to work in areas that have been ignored for long like agriculture, health, animal husbandry and biotechnology.

Speaking at the same conference, DIPP Secretary Ramesh Abhishek also shared the progress various states are making towards realising the Startup India initiative. He revealed that 15 Indian states have already
formulated their startup policies through which they're facilitating the young businesses in their own states. He said, “States are important partners in this exercise" as startups in the country need support in areas like funding, infrastructure and marketing.

Abhishek also revealed at the conference that a total of Rs 1,587 crore funds has been allocated to startups so far. This is separate from the intellectual property related benefits that the government has provided to 639 startups.

In addition to the existing fund, the DIPP is also considering setting up a Rs 2,000 crore credit guarantee fund that would provide funding facilities to startups.

This is The Only Startup That Just Got Full Tax Exemption Because of Yoga Tag

Yoga Guru Baba Ramdev, who has become world-famous over the years for his endeavours in Ayurveda, business, politics and agriculture has a big reason to smile. One of his ventures, Patanjali Yogpeeth, which is a public charitable trust, has come out victorious in its appeal before the Income-tax Appellate Tribunal (ITAT), which has finally accepted the Haridwar, Uttarakhand-based trust's tax-exempt status.

According to the reasoning provided by the Delhi bench of ITAT behind its decision, it concluded, since Yoga entails providing medical relief and the camps are also known to provide people both 'medical relief ' and`education,' hence it falls within the umbrella meaning of charitable purpose, thus the Patanjali Yogpeeth trust is fully entitled to seek I-T exempt status under the sections 11 and 12 of the Income Tax Act.

In its order dated February 9, 2017, ITAT said, "The finding of I-T authorities that propagation of yoga by Patanjali Yogpeeth does not qualify as medical relief or imparting of education is not justified."

While the litigation settled by ITAT's Delhi bench specifically caters to the 200809, the Tribunal has also taken into consideration the new subsequent amendment in the I-T Act, which came into action last year on April 1, 2016. This particular amendment in the spotlight specifically added the word 'yoga' within the definition of a 'charitable purpose'.

If the ITAT wouldn't have upheld Patanjali Yogpeeth's exempt status, it would have become liable to pay income tax to the Indian government like a regular company. It is interesting to note that the Yogpeeth's total income never came out in the open in the ITAT order.

In addition to the upholding the tax-exempt status, the ITAT also concluded that the whopping corpus of Rs 43.98 crore received by the Haridwar, Uttarakhand-based trust in donations, primarily for the purpose of construction of cottages under its Vanprasth Ashram Scheme (which caters to providing accommodation to people attending residential yoga courses at the Yogpeeth), were capital receipts and hence not liable to income tax. In its order, The ITAT mentioned, "Corpus donations are not taxable, even in circumstances where the trust is not eligible for I-T exemption".

The Delhi bench of ITAT even ended up deleting the various additions made by the I-T authorities to Baba Ramdev's Patanjali Yogpeeth's income. This included a Rs 96 lakh addition made for services the trust extended to Vedic Broadcasting in which Acharya Balkrishnan, a trustee and close aide of Baba Ramdev holds substantial interest. According to the ITAT, it deleted the additions because the I-T authorities on the ground had failed to understand the facts. In fact, towards the end, the ITAT also ended up agreeing with the submissions made by the trust and concluded that some of the inferences made by the I-T authorities such as receipt of anonymous donations or the provision of benefits to certain persons were made without fully understanding and appreciating the facts.

Well, the final conclusion is that Ramdev's Patanjali will be doing tax-free business from now onwards, and the one thing that really made this possible was its 'Yoga' Tag.