Union Budget 2021 - for Startups
Budget 2021: Key takeaways from Finance Minister Nirmala Sitharaman's Union Budget 2021 for small business & start-ups - The first-ever digital Union Budget.
Union Budget 2021: What's in it for startups - Key Takeaways From Union Budget 2021-22 For Indian Startups
The Union Budget 2021-22 proposals hold on six mainstays: Health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India reinvigorating human capital, innovation and R&D, minimum government and maximum governance.
While presenting the Budget, Sitharaman stated, only three times has the Budget reflected a contraction in the economy this time, unlike previously, the circumstance is due to a global pandemic Budget-2021 gives every chance for the economy to catch the speed and develop sustainably.
Tax Holiday For Startups Extended Till March 2022
To boost India's startups among this COVID-19 pandemic, tax holidays for these firms have been extended by one year till March 31, 2022, said Finance Minister Nirmala Sitharaman while presenting the Union Budget 2021-22 on 1st Feb 2021.
"Tax holidays for startups extended by one year, till 31st March 2022," said Sitharaman in the Parliament.
The capital gains exemption given to startups was also extended by a year more.
Sitharaman said "Definition of small companies under Companies Act 2013 to be revised. Companies with paid-up capital up to Rs. 2 crores and turnover up to Rs. 20 crore will fall under small companies, benefiting more than 2 lakh companies in compliance required,"
"To incentivise incorporation of one-person companies, such companies will be allowed to grow without any restriction on paid-up capital or turnover and to convert into any other type of company at any time," she continued.
Responding to the statements presented for startups during the Budget presentation, Lokendra Ranawat, Founder and CEO of WoodenStreet said, "the budget was awaited with a lot of expectations and of that most have been met. Infrastructure and healthcare were the main spotlights of budget 2021 and a large investment has been allocated for the expansion of the road network."
"Also, just like it was predicted, Startups were given importance in this budget as well. The tax-exempt on the revenue, as well as investments, have been increased by one more year which will be beneficial for the startup growth in the country," Ranawat added.
"On the other hand, the investment in MSMEs and the moratorium on loans of up to 2 crores will also play a crucial role for the Indian corporates. Privatization of several government-related sectors such as ports will also add to the economic growth and employment generation," he continued.
Government To Set Aside INR 3,800 Cr For First Digital Census
- Home minister Amit Shah had declared this initiative back in 2019
- Shah had earlier noted that the census will be conducted through a mobile app
- The digital census will be more cost-effective and less time consuming
“The forthcoming Census could be the first digital census in the history of India. For this monumental and milestone-marking task, I have allocated INR 3,768 crores in the year 2021-2022,” words by Finance Minister Nirmala Sitharaman.
Though Sitharaman did not further elaborate about the expected digital census, Shah had earlier remarked that the action will be brought out in 16 languages. He moreover said that the help in future planning of the country, especially for development initiatives and welfare schemes through people’s participation.
“India’s total 130 Cr population should be informed about its benefits. How, the census data could be used for future planning, development initiatives and welfare schemes. The utilisation of census data is multi-dimensional and will be a significant contribution to the nation’s progress,” he had continued.
New Definition Of Small Companies For Startups
Addressing at the Union Budget 2021, finance minister Nirmala Sitharaman has proposed to revise the definition under Companies Act, 2013 for small companies by increasing their threshold for capitalisation from not exceeding INR 50 Lakh to not exceeding INR 2 Cr and turnover from not exceeding INR 2 Cr to not exceeding INR 20 Cr.
“This will help more than 200K companies in easing their compliance requirements,” stated the finance minister.
The idea of a small company was launched under Section 2(85) of the Companies Act which had initially established a company as a small company if
- It has a paid-off share capital of not more than INR 50 Lakh or such larger sum as may be guided which shall not be more than INR 10 Cr.
- It has a yearly turnover of not more than INR 2 Cr or such a larger amount as may be guided which shall not be more than INR 100 Cr.
It must be noted that a public company, a subsidiary of another company, Section 8 company or a company governed under any Special Act will by default not be recognised as a small company regardless of the above criteria.
“As a further measure which directly benefits startups and innovators, the finance minister also proposed the incentivisation of OPCs (one person company) grow without any restriction on paid-up capital and turnover, allowing their conversion to any other type of company at any time reducing the residency limits for an Indian citizen to set up and OPCs company in 182 days to 120 days and allow also non-resident Indians to incorporate OPCs in India,” declared the finance minister. This will be a big lift for startups in the nation.
By the new sense of small businesses below the Companies Act, a great number of startups will be identified as small companies.
Small companies possess several advantages over other firms in terms of compliance demands. For example, a small company requires to continue just two board meetings yearly, but other companies are obliged to maintain four before-mentioned meetings during that period.
Small companies are not obliged to keep their cash flow statement and the annual returns could directly be signed by a company secretary or a single director. These businesses are likewise not needed to adjust their auditor under Section 139(2) which is compulsory for other firms.
In the case of regulatory breaches, the fines charged are also relatively low.
MCA-21 3.0 Portal To Reduce Compliance Burden On Startups With AI, ML Tech
The Union Budget 2021 introduced by Finance Minister Nirmala Sitharaman started importance on technologies such as Artificial Intelligence and Machine Learning, and their application to the e-Governance, GST and easing compliance burden.
The government had stated that the department would seem to present AI-based specialities in MCA-21 when version 3.0 of the portal is rolled out.
In May 2019, the MCA stated intentions to enter AI in the MCA-21 portal, currently being practised by organisations. This is supposed to make the agreement more manageable and guarantee that regular implementation activities are done round-the-clock on an autopilot mode. All things will be automated and likewise, regular enforcement can now be performed 24×7 on an autopilot basis.
Social Security Policy For Gig Workers, Food Delivery Partners, Cab Drivers
In Budget 2021, Nirmala Sitharaman offers to begin a portal that will gather information on the unorganised manpower in the nation to systematize health, housing, insurance, and credit plans.
Sitharaman spoke for “migrant workers particularly, I propose to launch a portal that will collect relevant information on gig, building, and construction workers, among others. This will help formulate health, housing, skill, insurance, credit, and food schemes for migrant workers.”
She also named the ‘One Nation, One Ration Card’ scheme through which recipients can maintain their rations everywhere in the country. Migrant workers in special advantage from this system—those staying apart from their houses can partly claim their ration wherever they are placed, while their family, in their original places, can claim the rest, she continues that the ‘One Nation, One Ration Card’ plan is under implementation by 32 states and Union territories, reaching about 69 crore beneficiaries. That’s a total of 86% beneficiaries covered. The remaining four states and Union territories will be integrated in the next few months.'
Specialists believe the government’s plans will deliver much-needed support for the unorganised workforce in the nation. “The pandemic created a massive problem for migrant workers during the lockdown. We should learn from this and make sure that gig workers and migrant labourers are protected in future. This idea of a portal is a good start and I hope the intent translates into efficient execution,” e-commerce industry veteran and co-founder of Again Drinks, K Vaitheeswaran says Fortune India.
- Ganesh, Bengaluru-based serial entrepreneur, and promoter of BigBasket, Portea Medical, and FreshMenu agrees: “The pandemic has brought into stark focus how vulnerable the unorganised sector workers are who contribute the bulk of our workforce. The strength of the large numbers can be used to create insurance and social security net by having a small per person charge borne by the government or the private sector platforms. The first step towards this is the collection of data.”
Sitharaman stated that 'social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees' State Insurance Corporation. “Women will be allowed to work in all categories and also in the night shifts with adequate protection. At the same time, the compliance burden on employers will be reduced with a single registration and licensing, and online returns,” she entered.
New Measures To Tackle Lending NPAs; Gujarat’s GIFT City To Get Fintech Hub
While presenting the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman has suggested building-up a "world-class" fintech hub near Gujarat capital Gandhinagar at GIFT City (Gujarat International Finance Tec-City).
Positioned on the back of the Sabarmati river, GIFT City is a designed business district that joins Ahmedabad and Gandhinagar. It is expanded across 886 acres of land with 62 Mn sq ft of a built-up area that covers office space, residential apartments, schools, hospitals, hotels, clubs, retail facilities and other recreational amenities.
According to its website, the district is outfitted with the most advanced technology and global best applications in support service delivery to offer worldwide working and living models. It also consists of a helpful multi-service special economic zone (SEZ) and an exclusive domestic space, along with India's first International Financial Services Centre (IFSC).
“The development of a world-class fintech hub at GIFT City announced in today’s budget will go a long way in promoting and developing fintech startups,” stated Tapan Ray, chief executive officer of GIFT City. “We would provide a platform for fintech firms to expand globally. The fintech hub will facilitate research, innovation and development of new-age skills in fintech which will help in creating new job opportunities and attract quality talent to GIFT City,” he continued.