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Union Budget

`No big effort to ease taxation norms of IT firms'

India’s startup capital Bengaluru has provided a mixed response to the Finance Minister Arun Jaitley’s budget.

Top tech entrepreneurs and industry experts said the budget has addressed a few issues including “ease of doing business” in India. However, they are also disappointed that no attention was given to easing taxation norms of software companies.

“I am glad that the government clearly recognizes that start-ups can be powerful problem solvers for the myriad issues facing the country and in turn generate employment as well,” said Mohandas Pai, former Infosys director and a top angel investor.

He said the government’s decision to allow for 100% deduction of profits for three out of five years between April 2016 and March 2019 is certainly a welcome step that will boost startups.

Bhavish Aggarwal, co-founder and CEO of Bengaluru-based taxi aggregator, Ola Cabs said it was encouraging to see the finance minister address some key road transportation issues and set aside a requisite budget for infrastructure development. He said creating inroads for entrepreneurship in the public transportation space and amendments in the Motor Vehicles Act to allow for innovations will provide a strong impetus towards enabling mobility for citizens.

“These proposed initiatives give us immense confidence as we work towards our mission of building mobility for a billion Indians,” said Mr. Aggarwal.

Shashank N.D. co-founder and chief executive of healthcare startup Practo, said the budget is a clear indicator by the government to bring development at the grassroots level for its citizen.

He said the fact that quality drugs will be made available by setting up 3,000 stores in rural India along with health insurance indicates that incentives should be made available to every Indian.

“The National Dialysis services programme is also a heartening initiative taken up by the government,” said Mr. Shashank. He also mentioned that the ease of registration process and the hope to complete the task in one day is a welcome measure.

Experts such as Harish H.V., a partner at financial advisory firm Grant Thornton India said the new initiatives be it depository for marks cards, e-market place for agri commodities and land bank records are opportunities for young ventures.

"They will enable startups to create newer solutions using these platforms and generate new opportunities,” he said. However many entrepreneurs based in Bengaluru which is home to approximately 5,000 tech startups said they are disappointed that no attention is being given to easing taxation norms of software product companies where there is significant friction.

Bengaluru-based software product think iSPIRT said there is confusion on “goods” verses “service” tax on online downloads and tax deducted at source on sale of software products.

Also competition from foreign companies selling business to consumer products without any tax in India is another big challenge for new-age firms.

“What has been announced has already been mentioned in Prime Minister Narendra Modi’s Startup India vision, there are no fresh sops for the startup industry," said an industry expert who did not wish to be quoted.

This article appeared in The Hindu on 01st March, 2016.