Page 44 - Banking Finance December 2017

ARTICLE

iv. Tax exemption for three years ness of such start-ups. Adequate awareness creating mecha-
Innovation is the essence of every Startup. Young minds nism needs to be strengthened. Long term loan facility
kindly new ideas every day to think beyond conventional should be provided to start-ups at a lower interest rate that
strategies of the existing corporate world. During the ini- is supportive to loan repayment and overall growth and
tial years, budding entrepreneurs struggle to evaluate the competitiveness of the start-ups.
feasibility of their business idea. Significant capital invest-
ment is made in embracing ever-challenges arising from The world first place exporter China also accelerated its
their venture. Also, there are limited alternative sources of economy with only small & medium scale industries in its
finance available to the small and growing entrepreneurs, early / initial stage. Japan, Malaysia and Singapore these
leading to constrained cash funds. are small counties give most of percentage employment
through small scale industries. Providing employment is
With a view to stimulate the development of Startups in possible with start up's. In India there are some negative
India and provide them a competitive platform, it is impera- shades that may leads unsuccessful in implementation of
tive that the profits of Startup initiatives are exempted from startups they are rigid licensing system, lack of Bank loan,
income-tax for a period of 3 years. This fiscal exemption shall guide lines and tax applicable.
facilitate growth of business and meet the working capital
requirements during the initial years of operations. The India has 130th rank among 189 countries in liberalizing of
exemption shall be available subject to non-distribution of licensing system. It should be liberalized to success of the
dividend by the Startup. startup scheme, in India banks also should be leaving their
rigid system in providing of loan and related guide lines. Tax
v. Tax exemption on investments above fair exemptions should be provided in the form of tax holiday
for first three years to start ups.
market value
Under The Income Tax Act, 1961, where a Startup (com- References
pany) receives any consideration for issue of shares which 1. https://en.wikipedia.org/wiki/Startup_company#definition
exceeds the Fair Market Value (FMV) of such shares, such
excess consideration is taxable in the hands of recipient as 2. http://m.inidatoday.in/education/story/start-up-india-
stand-up-india/1/573128.html
Income from other sources. In the context of Startups,
where the idea is at a conceptualization or development 3. kesav kumar, International Journal of Advance Research
stage, it is often difficult to determine the FMV of such in Computer Science and Management Studies. Indian
shares. online start ups can they stand up against the world. Vol-
ume 3, issue4, April 2015.
In majority of the cases, FMV is also significantly lower than 4. www.nasscom.com
the value at which the capital investment is made. This re- 5. www.startupindia.com
sults into the tax being levied under section 56(2). Currently, 6. Understanding the financing challenges faced by startups
investment by venture capital funds in Startups is exempted India - Omid Sharifi1, Bentolhoda karbalaei Hossein2
from operations of this provision. The same shall be ex- 7. Government initiative for Entrepreneurship development -
tended to investment made by incubators in the Startups. Start up India Stand up India - Madhura Wagh, (IRACST -
International Journal of Commerce, Business and Manage-
VII. Conclusion ment (IJCBM), Vol. 5, No 1, Jan-Feb 2016)
The startups will help the sustainable development of 8. Start up India: This is the beginning of big bang start up
economy. This scenario may seems many economies in the boom in India, says Softbank CEO", The Hindu, 16 Janu-
World. Germany is the best example to Contribute sustain- ary 2016
able development through implementation of small and 9. "PM Narendra Modi to unveil startup action plan today
medium level industries. The business environment in which as a major breakthrough for entrepreneurship in India -
technology based start-ups operate should be reviewed and The Economic Times", The Economic Times
improved upon in terms of the regulatory and legal frame- 10. "What India's Narendra Modi can do for India Startups",
work in order to encourage the growth and competitive- Inc.com, 2015-09-25

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