Finance Minister Nirmala Sitharaman tabled the Union Budget 2024-25 on Tuesday, unveiling a series of provisions designed to stimulate the new-age economy. These include measures focused on MSMEs, startups, ease of doing business, FDI, and adjustments to long- and short-term capital gains taxes. Here are the key highlights from the budget that will significantly impact Indian startups, founders, employees, and MSMEs:
Angel Tax Abolished
In a major boost to the Indian startup ecosystem and entrepreneurial spirit, the government has abolished the angel tax for all classes of investors, effective from April 1, 2024.
Support for MSMEs
To facilitate employment, skilling, and other opportunities focused on MSMEs, the government has allocated a central outlay of Rs 2 lakh crore. This substantial funding is expected to drive growth and development in the sector.
Ease of Doing Business
The government aims to simplify the rules and regulations for FDI and overseas investments, enhancing the ease of doing business. The success of the Insolvency and Bankruptcy Code (IBC), which has resolved over 1,000 companies and recovered more than Rs 3.3 lakh crore, is noted. Additionally, the Centre for Processing Accelerated Corporate Exit (C-PACE) will now facilitate the voluntary closure of LLPs, reducing the closure time.
Space Economy Development
The government has ambitious plans to expand the space economy fivefold over the next ten years. A Rs 1,000 crore venture capital fund will be established to support this expansion.
Climate Finance
The budget includes measures to develop climate finance and enhance the availability of capital for climate adaptation and mitigation. This initiative supports the country’s climate commitments and green transition efforts.
Capital Gains Tax Adjustments
The budget raises the long-term capital gains tax (LTCG) on both financial and non-financial assets to 12.5%, up from the current rate of 10%. Additionally, the short-term capital gains tax (STCG) on certain assets has been increased to 20%.
Corporate Tax Reduction
To attract foreign capital for development needs, the corporate tax on foreign companies has been reduced from 40% to 35%.
ESOPs and Foreign Asset Reporting
Under the new budget, non-reporting of movable foreign assets up to Rs 20 lakh will no longer be penalized under the Black Money Act. This change addresses issues faced by Indian professionals in multinational companies who receive ESOPs and invest in foreign assets.
Changes to the Share Buyback Process
Significant changes have been introduced to the share buyback process. Income from share buybacks by companies will now be taxed as dividends for the recipient investor, rather than the company paying additional income tax. This new provision will be applicable from October 1, 2024.
These budgetary provisions collectively aim to foster a more conducive environment for startups and MSMEs, attract foreign investments, and streamline regulatory processes, thereby strengthening the new-age economy in India.
