The Centre is concerned about the minuscule number of start-ups becoming eligible for tax benefits under the Startup India programme, with just 39 start-ups qualifying for such concessions even 18 months after the flagship initiative was introduced by Prime Minister Narendra Modi.
“Till March (2017), only around 10 start-ups were found eligible for tax benefits,” a senior government official told The Hindu . “In the last three months, though, this number has gone up to 39, we feel this is too low given the programme’s high ambitions.”
With the norms specifying that in order to obtain tax benefits, a start-up should be a private limited company or a limited liability partnership incorporated on or after April 1, 2016, few companies qualified for tax benefits in the initial period as there were not many corporate entities incorporated on or after that cut-off date.
Norms relaxed
The passage of time is mitigating this problem with several firms becoming eligible, said the official, who did not wish to be named. The recent relaxation in norms that include doing away with the requirement of ‘letter of recommendation’ from an incubator/industry association for recognising a company as a start-up or for tax benefits will also help increase the number of start-ups that will qualify for tax benefits.
With the changes in norms, which include broadening the scope of definition of start-ups to include ‘scalability of business model with potential of employment generation or wealth creation,’ the Centre has decided to reappraise all rejected applications to give all applicants a “fair chance,” the official said. The aim is to cross 100 by end September.
