The fiscal measures announced in Budget 2023 will only apply to less than 1% of India 84,000 DPIIT registered startups. There was no mention of the rationalization of the IMB regime, which is required to allow startups to avail of any of the benefits under the Income Tax Act, 1961. No change in the ESOP measures either – a longstanding ask of the Indian startup ecosystem.
Measures to curb the flipping of startups, which was mentioned in the Economic Survey, have also not been bought out.
Angel Tax applies to investments by non-residents as well
Angel Tax (Section 56(2)(viib)), which taxed the issue of shares at a premium to Resident investor in the hands of the company has now been amended to include non-residents as well. Thus the only exemption to angel tax is an investment from a SEBI-registered AIF
Carry Forward of Losses Under Section 79 increased from 7 years to 10 years
IMB registered startups could carry forward their losses for 7 years. That period has now been extended to 10 years
Qualification for IMB certification pushed by 1 year to April 1,2024 from April 1, 2023
In order to receive IMB certification to obtain any Income Tax benefits, a startup should have been incorporated between April 1, 2016 to April 1, 2023. That has now been extended to April 1,2024
TDS threshold of Rs 10,000 was removed for income from online gaming. All money withdrawn will be subject to TDS here onwards. This will adversely affecting online gaming startups as it would increase the cost of compliance for them
Non Fiscal Measures
Digital Public Infrastructure for Agriculture
A framework similar to Aadhar and UPI for agriculture will be created as a Digital Public Good. It will be open source, open standard and interoperable. It will empower farmers with information, access to farm inputs, credit, insurance, market intelligence. Startups and Agri-tech will be crucial for the success of this.
Agriculture Accelerator Fund
Startups have emerged as the vehicle for the government to reform the agricultural sector. Budget 2023 announced an Agriculture Accelerator Fund to support agri-startups in rural areas. This capital support will help deepen the integration of agritech into the agricultural supply chain.
National Data Governance Policy
Startups will able to benefit from access to anonymized data through the National Data Governance Policy