Union Budget 2016 on Startups

The Union Budget that was presented by Mr. Arun Jaitley this year appears to have partially appeased entrepreneurs by providing relief in the form of taxes to start-up companies. The finance minister has stated that there would even be “amendments to the Companies Act to create an enabling environment for start-ups”.  The budget reliefs follow a recent announcement by the Government on the definition of a start-up. (Please refer to our earlier post)

The following are the key takeaways for a start-up from this year’s Union Budget:

1. A 100% deduction of profits for 3 consecutive years out of the 5 years of the existence of a start-up. However the minimum alternate tax will apply in such cases; and

2. Provisions relating to capital gain on transfer of residential property not to be charged in the specified cases as provided under Section 54GB after March 31, 2019 for start-ups while simultaneously extending the meaning of new assets and an eligible company in order to provide for start-ups. The definition of new asset shall also include computers or computer software in case of technology driven start-ups certified by the Inter-Ministerial Board of Certification notified by the Central Government in the official gazette.