India’s current rate of GDP growth at 5% comes under one of the better growth rates all over the world. This rate is very low for a country that has been growing at a fast rate since the economic reforms of the early 1990s, and now the economic decline is almost hitting rock bottom. The persistence of the Indian Economy might seem a bit ruled out for now. However, it is going to be really difficult. The economy of the country requires a rise. For this, the economy requires a push from the government. A helping hand will be of great benefit. This will boost the economy. Therefore, the Union Budget 2020 proposed by our finance minister Nirmala Sitharaman as potential chances for emerging entrepreneurs and startups in india.

In the meantime, others awaited the declaration for the imminent budget of 2020. Corporate individuals expected a productive outcome from budget 2020 for startups. Reduction in the corporate tax rate, opportunities for beginners to boost their career, etc., will be beneficial for the startup companies in India. 

As a result, our GDP has limited itself from 8–9% to a mere 5%. Demonetization has also affected our GDP. We cannot back out of this fact. Subsequently, the results will come to light about the budget impact on startups.

The Union Budget 2020 was brought forward in the Lok Sabha by Nirmala Sitharaman. She is currently serving our nation as the Minister of Finance and Corporate Affairs. 

Union Budget 2020 Changes

However, after the income tax slabs had been revised, there are two frames to pay tax. One remains the old system and the second becomes the newly introduced one. This enables a reduction in the corporate tax rate to enhance the budget impact on startups in India.

Here, the currently established slabs are lower than the previous slabs. But according to the current scheme, you cannot avail many waivers (70 exemptions) that include HRA (house rent allowance), LTC (leave travel concession), waivers on 1.5 lac savings (under 80C), standard deduction, an exemption under home loans. 

Income tax reductions and changes set up by the Union Budget 2020 are as follows:

  1. An individual does not owe income tax for income ranging up to 2.5 lacs
  2. For income between 2.5 lacs to 5 lacs, the income tax rate will be 5%
  3. Income ranging between 5 lacs to 7.5 lacs, the income tax rate will be 10%
  4. The income between 7.5 lacs to 10 lacs, the income tax rate will be 15%
  5. The income which ranges between 10 lacs to 12.50 lacs, the income tax rate will be 20%
  6. For income between 12.50 lacs to 20 lacs, the income tax rate will be 25%

Similarly, she has come up with proposals that move with an objective to ease up the business process for start-ups in India. With this, angel or seed funding has been contemplated for initial stage start-ups which will help them to develop. 

Angel Tax and Angel Investors

The I-T law, a start-up firm which endures capital infusion excess of fair value encounters a tax which is termed as angel tax. The commercial value remains steady and has an equitable approximate calculation of the value of goods or services in a commercial market.

The investors who invest in small start-up firms or entrepreneurs are angel investors. They invest in the firm in exchange for ownership. 

With this, they grow from business to wealth generators as the government supports them for this. 

Benefits for Startups in India

A provision of 3000 crores has been allotted for skill development which will be used to promote the growth of start-ups.

Besides this, many schemes have come up to improve start-up culture. Similarly, the ESOP i.e. Employee Stock Ownership Plans have been relaxed. One can reschedule it for up to 5 years or till the time they resign from the company. It can also be until they sell the shares, depending on the case. 

For the foreseeable future, budget 2020 for startups will be greatly advantageous. Soon, the businesses having a turnover up to 100 crores will be at ease for three financial years from the beginning of their journey. 

To expand these benefits for major start-up firms, the turnover limit will be 100 crores. Usually, a start-up does not have sufficient proceeds in the initial years to avail this rebate. Sitharaman extended the duration of aptness for the claim of a rebate from the existing 7 years to 10 years.

Hence, with this proposed idea/scheme, the budget impact on startups can be of great help or of distress. Depending on how one performs to obtain the most of out of it.