At first glance, Budget 2018 has been a disappointment for the startup ecosystem, specifically from the tax perspective. The ask from the startups and investors was to do away with the dreaded ‘‘angel tax’’ and the differential treatment of listed and unlisted equity from the long-term capital gains tax perspective.
But some investors YourStory spoke to are hoping that the details, especially in the Budget Annexure, will provide some relief. They are basing this hope on two portions of the Finance Minister's speech:
The first one:
‘‘Venture Capital Funds and angel investors need an innovative and special developmental and regulatory regime. We have taken a number of policy measures, including launching Startup India programme, building very robust alternative investment regime in the country, and rolling out a taxation regime designed for the special nature of VCFs and angel investors. We will take additional measures to strengthen the environment for the growth and successful operation of alternative investment funds in India.’’
The second one:
‘‘Hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for startups and venture capital. The Government will evolve a separate policy for hybrid instruments.’’
An early stage investor YourStory spoke to, on condition of anonymity, said:
‘‘The devil lies in the details. It will all depend on the details that will be shared on this policy. I am hoping the Budget Annexure will have some details. But I am doubtful, as any significant change would have been announced in the Budget speech. If there is nothing in the Annexure, then it is a disaster. Nothing is happening other than symbolic or incremental changes.’’
While nothing was mentioned on angel tax, in the case of long-term capital gains tax, a 10 percent tax has been introduced on long-term profits of over Rs 1 lakh made from trading in listed stock. This is still less than the 20 percent long-term capital gains tax on selling unlisted stock.
‘‘This is a populist budget from a traditional sectors' point of view. There's nothing for startups in it. It is very disappointing,’’ said a senior executive at an industry body.