7 Key Expectations of Startups from Budget 2024
Fairer Capital Gains Tax
Start-ups want equal treatment for listed and unlisted equities in long-term capital gains (LTCG) tax, currently 20% for unlisted vs 10% for listed. This discourages investment in risky ventures.
Reduced Tax burden
Lower the cascading effect of taxes on founders, businesses, and dividends. High taxation disincentivizes risk-taking and hampers Indias $5 trillion GDP target.
Revise ESOP Taxation
Revise ESOP Taxation Revise the current model to avoid taxing employees on unrealized gains from unlisted shares received as ESOPs, even without cash flow. Offer more practical deferment options for TDS on ESOPs.
Clarify AIF Taxation
Provide clear guidelines on the taxability of carry fees paid to fund managers in Alternate Investment Funds (AIFs), currently under ambiguity after a 2021 tax tribunal ruling.
SEP & EQL: Avoid Duplication
Ensure Significant Economic Presence (SEP) regulations only apply to quantifiable digital transactions, and avoid double taxation by eliminating overlap with the Equalization Levy (EQL).
Expand PLI Program
Broaden the scope and sector coverage of Production Linked Incentives (PLI) to boost manufacturing and exports. Introduce a Phased Manufacturing Plan (PMP) for new products.
Revise M&A Tax for Start-ups
Make Mergers & Acquisitions (M&A) tax more attractive by taxing promoter gains only when crystallized, regardless of transfer timing. This will facilitate profitable exits for start-ups and PE funds.