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Elections 2019: Industry roots for Angel Tax abolition, AI-enabled solutions

Changes in the FDI policy in the ecommerce space which came by in February this year also made startups wary of the changes that were to follow.

ET Online|
May 23, 2019, 04.23 PM IST
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Startups working in the social impact space with AI and technology central to their framework say that they should be eligible to procure CSR funds.
The startup industry is hopeful that the new government will create a thriving ecosystem to make them flourish. Buoyed by earlier positive initiatives such as the Fund of Funds for Startups (FFS) under SIDBI, women entrepreneurship and a sharp focus on Artificial Intelligence (AI), the industry is looking forward to what lies ahead for their ilk. Expectations are also high that the ironically titled ‘Angel Tax’ will be done away with to help the cause of the startup community.

“I sincerely hope the new government will continue its focus and support to the startup ecosystem and accelerate the momentum built up over the last 5 years. Section 56 needs to be abolished completely as section 68 and General Anti-Avoidance Rules (GAAR) are fully adequate to address the requisite concerns,” asserts Saurabh Srivasatava, Chairman, Indian Angel Network (IAN).

Srivastava’s concerns centre around the Angel Tax issue, a provision of Section 56(2) (viib) of the Indian Income Tax act which had sent notices to many startups on their valuation methodology and wanting that taxes be paid on the funds raised.

In what was seen as a relief earlier this year, the investment limit for angel tax exemption had been increased to Rs 25 crore, up from the previous Rs 10 crore. The definition of a startup had also been revised with Rs 100 crore being the turnover limit for an eligible startup as against Rs 25 crore earlier.

Changes in the FDI policy in the ecommerce space which came by in February this year also made startups wary of the changes that were to follow.

Ecommerce player Snapdeal, however, feels that it is an exciting time for small retailers to grow in the online world. “The decisive mandate for the new government is a welcome development, which will allow undivided attention to national priorities like boosting employment and creating more enterprises across the country. We look forward to the effective implementation of key policies like Press Note 2 / 2018, which will enable Indian MSMEs to benefit from the growth of Indian e-commerce and not be crowded out by violation of FDI norms,” a Snapdeal spokesperson said.

There has also been a renewed interest by the government on Artificial Intelligence (AI) and fast tracking the Indian entrepreneurial journey to make inroads in this space.

Gaurav Gupta, Co- Founder and COO at Navia Life Care, a health tech startup says AI has the potential to double the size of our economy by 2025. He expects a strategic plan by the government to promote AI in various sectors via coordination of different ministries with the IT ministry and technology startups. “Entrepreneurship has a potential to create millions of jobs in the country. We hope this government will create policies where a conducive environment is created for innovation. True innovation needs capital, stakeholders' willingness to try new products and strict policy implementation. Entrepreneurs expect more opportunities for raising high risk capital. Lastly we need policies to be implemented for higher use of technology to make systems efficient and transparent,” he adds.

Agreeing with Gupta, Tanmaya Jain, CEO and founder of inFeedo, an HR tech startup roots for more AI enabled solutions to offer the right impetus to this domain. “Recognition of software patents in India will help young startups to continue to have innovation as a differentiator in today's competitive landscape.”

Startups working in the social impact space with AI and technology central to their framework say that they should be eligible to procure CSR funds. “Process and compliance to invest CSR money in technology incubators / social impact organizations should be simplified and streamlined,” says Sudeep Gupta, Founding Partner of Impactify, a Gurugram-based startup which works with development sector organisations.

Naveen Krishna, Founder and MD of SMV Green Solutions, an Allahabad-based startup hopes that the government will form policies where electric vehicle charging infrastructure will get a boost with reductions in the cost of lithium batteries and electricity used at charging stations. Like many other startups, Krishna too is keen for a waiver of the Angel Tax on startups to boost the entrepreneurial spirit and culture in the country.
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