7 Key-points From The Union Budget 2021 For Start-ups & Entrepreneurs

As the Union Minister did away with the traditional Bahi-Khata and presented the Union budget 2021 in a Digital format, the indications were clear. The Government is pushing for more Digitization. Moreover, the Budget focuses on reviving the hammered economy due to COVID & Job Creation.

The Government is willing to spend more on the healthcare and pharma sector. Also, the Government has projected a fiscal deficit of 6.8% of GDP. Sill, the stance of the Government on the Indian economy is Bullish.

Amidst all this, what the Budget has for entrepreneurs and Start-ups? How will the recent changes impact entrepreneurship in India? How well the Budget went down with the entrepreneurs? We will be answering all these questions in this detailed blog.

So let’s get started.

Key points of Union Budget 2021

• Tax Holiday for Start-ups

Start-ups were at the core of this Union Budget as Government is focusing on Job creations right now. This decision of offering Tax Holiday for the start-ups for one more year until 31^st March 2022 comes at the right time. This will ensure more entrepreneurs will be motivated to launch their Startups.

The 3 years Tax Holiday concept for start-ups was introduced by the then Finance Minister Arun Jaitley in the year 2016. He had announced that any start-ups incorporated after 31stt March 2016 with the annual turnover below INR 25 crore could benefit Tax Holiday.

• Tax exemptions for investments in Start-ups

There have been many cases where promising Start-ups have failed to leverage their true potentials due to severe financial stress. To solve this issue, the Government had offered the Tax exemptions to the investors on Capital Gains.

 The date of exemption was ending on 31^st March 2021. But the Government has decided to extend this date to 31st March 2022. This will boost investments in Start-ups, resulting in more employment and GDP growth.

• Lesser Compliance

The Government has decided to offer much-needed relief to various Start-ups by reducing their compliances. Under this relief, the FM offered a proposal to modify small companies’ definition under Companies Act 2013.

Previously, the companies with the annual turnover below INR 50 lakh were considered small companies. After the proposed change, the companies with annual turnover below INR 2 crore will be treated as Small Companies.

This change in definition will have a resonating impact on the Start-ups. The proposed change will reduce a lot of compliance burden for them. Apart from this, these Businesses will be able to avail a lot of benefits from the Government. According to FM, at least 2 lakh Businesses will benefit from this decision.

• Empowering Fintech

With the announcement of INR 1,500 crore boost for the Digital payment, the Government made its intentions clear to push Digital Payment for more inclusion. The Government has also proposed to spend INR 20,00 for setting up Development Financial Institutions. This institution will focus on offering credit facilities to small businesses indulged in manufacturing & infrastructure industry.

For inclusive growth, the Government has also decided to reduce the margin money requirement from 25% to 15% for  Stand up India scheme for SC, ST & Women entrepreneurs.  Many experts see this as a major boost for such entrepreneurs. The FM also laid out a plan for setting-up a fintech hub in the GIFT city near Gandhinagar.

• Going Green with Electric Vehicles & Railways

As numerous countries are planning to go green by adopting electric-powered vehicles, the Indian Government has also decided to go 100% electric by the end of 2030. In her Budget, FM has allocated a budget of INR 18,000 crore for complete electrification & spreading the railway network in numerous rural areas.

In a move that is seen as the boost to low-emission & electric-powered vehicles, the FM also introduced voluntary scrapping policy of older and high-emission vehicles. 

The FM also proposed plans to bring Metroneo & Metrolite public transport projects to various tier-2 & tier-3 cities. Overhead traction systems will power these rubber-tyred public transport vehicles. The goal is to offer eco-friendly, affordable and efficient means of public transportation.

• Agriculture Going Digital way

The FM stated the Government is continuously working towards bringing more farmers under the eNAM portal. As of now, more than 1.68 crore farmers have registered themselves on this portal. With around 1000 Mandis on the Platform, the Government is working towards improving these Man’s infrastructure.

The FM stated there was almost 1.14 lakh crore worth of Transaction on the eNAM.

• FDI boost for Insurtech

This was another major decision taken by the finance minister. She proposed to amend the Insurance Act, 1938, raising the FDI limit from 49% to 74%. But there will be few conditions for this.

For e.g. a majority of directors of these investment companies should be resident Indians, & certain profit percentage will have to be retained as general income. The FM stated that this decision’s primary goal is to ensure the smooth inflow of capital by investors in Insurance companies. This will allow better support and broader reach of Insurance to Indians.

Conclusion

In Budget 2021, the Government has taken cue of the current situation of the Indian economy. With a focus on reviving the economy and creating more jobs, the Budget has undoubtedly some good news for entrepreneurs and Start-ups.

So if you are planning to launch your start-up, now is the time. Create a roadmap around your idea ad start working towards your goal.

Meanwhile, if you need any assistance, whether with Business registration, Business Management, Funding, Compliance or Accounting, we are here to help. So feel free to reach out anytime you like.

Did this Union Budget fare well in your views? What more changes would you like to see in the system?

Please let us know in the comment section.

Probal Consulting Group is a leading Taxation, Accounting, and Compliance firm that helps individuals, MSMEs, and other businesses manage their accounting, taxation regulatory compliance affordably.