Approvals to start-ups for tax sops multiply as govt softens stand

Faced with criticism over the slow pace of approvals to start-ups for tax sops, the government has speeded-up the process with as many as 55 ventures getting the go-ahead in the on-going fiscal so far as opposed to just 10 approved in the last financial year.

“Approvals will be even faster in the coming months as now the inter-ministerial board (IMB) is giving reasons to applicants for non-approval and is allowing start-ups to apply again by making changes in their original proposals,” a government official told BusinessLine. The Prime Minister’s ‘Start Up India’ campaign launched in January 2016 with the objective of boosting entrepreneurship and creating more jobs across the country has been losing some sheen because of the low levels of tax incentives on offer and the handful of start-ups that qualified for it.

The Union Budget for 2017-18 sweetened the incentive package for start-ups to some extent by allowing eligible entities to make use of their three-year tax holiday in a block of seven years instead of five years.

However, the fact that just 10 start-ups were approved for tax incentives last fiscal against about 140 proposals vetted by the IMB also needed to be addressed.

“The Centre realised that announcing tax sops for start-ups do not amount to much if very few are eligible for it. While the criteria of innovation for qualifying for the sops cannot be changed, the DIPP realised that it could help the start-ups in meeting the criteria by pointing out where they are going wrong,” the official said.

More meetings

The Department of Industrial Policy & Promotion (DIPP), which runs the start-up programme, decided in April this year to increase the number of IMB meetings for vetting applications and instead of rejecting proposals, communicate with applicants on why their projects did not pass scrutiny.

“Since May this year we have had seven meetings of the IMB which not only considered new proposals for tax exemptions by start ups but also revised proposals by earlier applicants which were not approved,” the official said. The IMB comprises officials from the DIPP, Department of Bio-technology, Department of Science & Technology and the Ministry of Electronics, IT & Technology.

So far, the government has recognised over 2,000 applicants as start-ups of which 65 qualify for tax sops.

While only those start-ups that have been incorporated after April 1 2016 and meet the innovation criteria are approved for income tax holiday, all others are eligible for other benefits such as exemption from various compliances, help to file IPR applications and some relaxation in norms of government procurement reserved for small enterprises.


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