Page 95 - DTPA Journal December 21

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Nov. - Dec., 2021

COMPLIANCE MISHAPS

IN INDIAN STARTUP ECOSYSTEM

CA Ritwik Khator

On 3rd June the headlines read, “Government iii. Out of the 50,000 Startups recognised
recognises 50,000 startups across India” and we all by DPIIT, only 399 startups have
clapped our hands. In a short span of 5+ years, the received the tax exemption certificate
Startup India initiative, executed by the from the IMB till date. That’s less than
Department for Promotion of Industry and Internal 1% of the entire lot!
Trade (DPIIT), has largely been successful in
iv. This tells us that only the most
creating a vibrant ecosystem of new age businesses
innovative and the most scalable
by recognising startups, creating engagement,
startups will get IMB certification.
easing compliances, introducing benefits and
Ironically, these are the very startups
iterating. It’s no surprise that in the same timeframe
that hit the turnover threshold of INR
India’s ranking in World Bank’s ease of doing
100 Crore the fastest.
business index improved from 130 to 63 out of 190
nations and its unofficial startup capital, Bengaluru 2. Capital Gains exemption for Entrepreneurs:
got the tag of ‘the World’s fastest growing tech- No practical application:
hub’ from a UK based research firm. But among all a. Did you know?: If a person sells her/his
this glitter also lurks the rising asymmetry between residential property to start a Tech Startup, her/his
the headline policies and their practical application Capital Gains arising out of sale of such property
at ground level. Let’s take a walk: can be exempted under section 54GB of the
1. Tax Holiday for Startups: Too good to be true: Income tax Act.

a. What is it?: Under section 80-IAC of the b. Did you also know?: The exemption
Income Tax Act, startups that have received a tax comes with a long list of conditions that you can
exemption certificate from the Inter-Ministerial read HERE.
Board (IMB) enjoy tax exemption on profits for 3 c. The catch: The exemption is only available
consecutive years out of the 1st 10 years of its for IMB certified startups. Which means that
operations. Amazing! entrepreneurs of only 399 Companies in this
b. The catch: country can claim benefits under section 54GB as
of today.
i. If your turnover exceeds INR 100
Crore, you cannot claim exemption. 3. ESOP tax deferment scheme: Well thought of
but you can’t take benefit:
ii. Obtaining the certification is a long
a. What is it? ESOPs are a great way to
drawn process.
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