FM Extends Tax Holiday, Capital Gains Exemption For Startups

While presenting the Union Budget 2021, providing relief to startups, the Finance Minister extended the tax holiday by one more year to March 2022. Nonetheless, experts opine that since most of the startups are incurring losses, the move will have limited effect on them in the near term.

Besides capital gains exemption relief has also been extended by one more year for the startup ecosystem. In the current regime, capital gains is exempt for angels for startups that are recognized by DPIIT. This is an extension for FY22 which is welcome and should be continued for attracting investments into startups from HNIs and VC funds," said Anup Jain, Managing Partner, Orios Venture Partners.

"The government has always focussed on boosting the startup ecosystem, attracting investments and creating jobs. But as we know most startups are loss making, so tax holiday has limited immediate impact," said Ankur Bansal, Co-founder and Director, BlackSoil.

Other direct and indirect steps have also been announced in the annual budget 2021 for startups. "Direct measures that will have a positive impact on the ecosystem include OPC (one-person company) reforms and setting up of a Fintech hub in GIFT city. Indirect measures like massive increase in healthcare spending, higher capex, infrastructure building and reducing some stress in the banking and financial system will also be a net positive for startups and the VC ecosystem," said Jatin Desai, managing partner, Inflexor Ventures.

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