Business-Economic Survey for rationalisation of tax policy for startups

The Economic Survey Thursday suggested rationalization of tax policy for startups to encourage 'innovative investments' in the Indian economy, as it acknowledged their role in driving economic growth and creating jobs. The Economic Survey for 2018-19, tabled in Parliament by Finance Minister Nirmala Sitharaman, noted that countries across the world recognized the need to evolve the tax system that can foster innovation.

"Therefore, tax policy and its implementation for startups must be rationalized to foster innovative investments in the Indian economy," the Survey said. It pointed out that growth in the new economy cannot be fostered without an ecosystem that rewards innovation and entrepreneurship.

"Startups and innovative ventures face significantly greater uncertainty than traditional "brick-and-mortar" firms. Yet, policy ambiguities that create collateral damage for genuine risk-takers can affect investments by dampening the animal spirits in the economy," the Survey added. Underlining the vibrant startup ecosystem that has developed in India, the Economic Survey emphasized that continuing the creation of an ecosystem for private investment, especially in the new economy, is critical to enable the cycle of investment, demand, exports, growth, and jobs.

The 'Startup India, Standup India' initiative in 2015 has aimed to create an ecosystem that is conducive for the growth of such companies. As on March 1, 2019, 16,578 new startups were recognized across 499 districts, 47 percent of startups from Tier 2 and 3 cities. Elaborating on the industry-wise distribution of recognized startups, it said IT services accounted for around 15 percent, followed by healthcare and life sciences at around 9 percent and education at 8 percent.