The pandemic has disrupted the world and our lives drastically as we knew it and changed the very course of living. After a two-year of pandemic life, things are slowly starting to look up, although a third wave is raising and business people are still hoping that the worst is behind us, and it is time for the entrepreneurs to make the necessary changes to move towards the other side of the world. If you are an upcoming entrepreneur take a glimpse at our latest blog!
A major problematic area for small and young businesses in India is the availability of working capital. For every entrepreneur, there must exist a hassle-free procedure to get paper works ready and sanctioning of loans required. As loans and finance procedures have to be eased for the start-ups and Micro, Small, and Medium Enterprises (MSMEs), which is the backbone of India’s manufacturing sector. The collateral-free business loans along with zero service fees make the finance part hassle-free for the set up for new entrants, and loans should be available at a very nominal rate of interest to the entrepreneurs.
The Union Budget 2022
The Union Budget 2022-23 presented on February 01, 2022, by the Finance Minister of India, Nirmala Sitharaman made fresh announcements for the start-ups in the country and provides ease of doing business for the start-ups and Micro, Small, and Medium Enterprises (MSMEs). For the Indian start-up ecosystem, the finance minister announced the extension of the tax holiday up to March 2023. The government also increased Emergency Credit Line Guarantee Scheme (ECLGS) from Rs 50,000 crore to Rs 5 lakh crore, which will help millions of MSMEs impacted by COVID-19 to receive support.
The interconnectivity of MSME platforms such as Udyam, e-Shram, NCS, and Aseem portals shall improve entrepreneurial opportunities and facilitate operability for small and medium businesses in the country. Let’s check out the major takeaways for Entrepreneurs from the Union Budget 2022.
1. Financing from NABARD
The budget for the year 2022 states to provide funds through NABARD to finance start-ups for agriculture and rural enterprise, relevant for farm produce value chain. The start-ups supporting food producer organizations, farm rental services, and IT-based support for Agriculture are eligible for funding under the scheme. Start-ups will also support FPOs and provide technological learnings to farmers for better crop management and promoting chemical-free, natural farming in the country.
2. Business 2.0
In order to improve the ease of living and business, the government has introduced the digitization of manual processes in this year’s budget. It includes integration of state and central units, and the removal of overlapping compliances under this scheme which shall encourage more investment in start-ups. Moreover, the policies rolled out will result in the extensive use of technology in building business across the country and have eliminated unneeded compliances and repealed laws.
3. Concession in Corporate Tax
There is an extension of concessional corporate tax of 15% till march 2024 for newly incorporated domestic industries and manufacturing units stated in the budget of FY’22-23. Moreover, this concession can bring parity between the surcharge for long-term capital gains which shall encourage more mergers and acquisitions, which is a wonderful step forward for Fintech start-up entrepreneurs.
4. Start-up Tax holiday scheme
Budget 2021 has extended the start-up tax holiday scheme to start-ups incorporated till March 31, 2023. As the number of new start-ups increased in 2021 for the first time in six years, the tax holiday extension can help to build a dynamic start-up environment in the country. Also, start-ups can avail of the exemption provided that annual turnover does not exceed INR 25 Cr in any financial year.
5. Budget allocated for Drone Shakti
Firstly, the Drone Shakti program stated in the budget shall be promoted to facilitate the use of Drone as a service (DrAAS) for varied applications. Secondly, in order to upskill the youth, required courses are provided regarding drones at ITI’s in several states. Finally, Kisan drones are to be adopted which shall be used to promote crop assessment, land record digitization, and fertilizer spraying.
6. Budget allocated for Defence R&D
The Defence Research & Development shall be unbolted for start-ups. With 25% of the amount to defence R&D allocated to private industries and start-ups in order to design and develop military platforms and equipment. This can boost the growth of technology provided by start-ups in the country as the earlier proposed Public-Private Partnership Scheme (PPP).
Although there is an extension of tax holidays to start-ups for another year, nearly 99% of start-ups that don’t have IMB certifications may not be eligible to avail of the benefits and do not address the core needs of start-ups. Also, when it comes to extending support to women entrepreneurs in the country, the Union Budget addressed very little, given the hardship faced by women-owned businesses. The existing start-ups who are struggling to survive don’t have much benefit coming from the new budget announcement by Union Government. The government should provide added support in assisting start-ups through policies and support mechanisms towards domestic capital participation. Measures have to be taken in promoting more women to become entrepreneurs by providing incentives to set up incubators, tax exemptions in FDIs, and relaxing taxes for start-ups.
The pandemic has taken a huge toll on start-ups in the country and, with the slowing down of the economy and lack of funding, the sustainability of start-ups remains a big concern. The provisions such as the extension of tax holiday and exemption of capital gains will certainly help to boost the investment in the start-ups. Lowering the compliance burden, reducing residency requirements, and setting up of seed fund corpus is a welcome move to encourage new start-ups in the eyes of entrepreneurs.