In a pre-budget memorandum, NASSCOM demanded that startups be exempted from direct and indirect taxes including minimum alternate ta x, a move that would reduce compliance burden and reduce cash outflows.
There is an urgent need to remove angel tax that serves to tax the capital receipts, when the availability of financing from recognized sources such as Banks and Venture Capital Funds is unavailable, it said.
Angel funds are the only available source. Similarly, NASSCOM said suggesting that companies may be allowed to carry forward losses even if there is change in ownership structure, if it for capital infusion in the entity.
Presenting the recommendations to the finance ministry, R Chandrashekhar, President, NASSCOM said that, “policy regulations like ease of compliance, reliance on self-certification instead of audits, tax exemptions for startups will allow entrepreneurs to devote their time, energy and resources to build upon their innovative ideas.
With the number of tech start-ups in India growing over 40 percent over the last year , these startups can potentially develop innovative solutions to address the development needs of the country as startups focus on development solutions for health, infrastructure and energy amongst others”
To enable investments in startups, NASSCOM said Investments in early stage startups are high risk and there is a need to rationalise tax rates for investors.
Harmonise capital gains tax for resident investors with non-resident investors and tax rates for angel investors
Allow proprietary domestic capital to set up an LLP as an investment vehicle.
Exemption of capital gains tax on income from sale of equity of a startup if the proceeds are reinvested in securities of new start-ups NASSCOM said that high level committee be set up to evaluate emerging trends and technologies, which should be institutionalized to provide inputs and triggers for policy roadmaps.