Budget Bytes: 6.5 on a scale of 10 for Jaitley

Wednesday, 1 February 2017

Ajith Mohan Karimpana, 
CEO and Founder, Furlenco

"This budget is a continuation on the path towards improving tax administration & compliance and increased emphasis on digital transactions; Similarly the attempt to clean up political funding is also commendable.

However, given the strong emotions that the Demonetization exercise evoked from the country at large and impending implementation of GST, the government refrained from bringing in any pathbreaking changes on direct  taxes. Most of the proposals of personal and corporate tax have marginal impact for the tax payers.

Specifically coming to the extension of tax break for startups to 7 years, this change was definitely required as there are very few startups that actually generate profits in first 5 years of their existence; reduction in corporate tax rate for entities with turnover less than Rs.50 Cr may not be of much use for new age startups that take 5-7 years and much larger turnover base to turn profitable.

Income Tax rate for companies with turnover of over Rs 50 crore has been reduced to 25%: The impact of this proposal is very minimal as very few startups are profitable at Turnover levels of Rs. 50 Cr; secondly, even if they are profitable, post the expenses, the net profit chargeable to tax is very minimal; tax rate is reduced from 30% - 25% for that  minimal profit - In our view this provision is not necessarily useful for most of the startups.

Overall on a scale of 10 we would rate the budget 6.5.

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