Union Budget 2021

After the economy hit the rock-bottom post the pandemic-created market slowdown, India was looking up to its Finance Minister Nirmala Sitharaman with great expectations for new announcements that would help the startups in the country to get back to normal.

With the announcement of the Union Budget 2021 by the Finance Minister, here are highlights which suggest that how startups in India will be benefitted from the current budget:

Tax Incentives: Finance Minister has extended by one more year the tax holiday for startups, which will provide a much-needed post-pandemic boost to the upstarts. This means startups will get capital gains exemption by one more year to 31 March 2022. They will also have one more year to claim tax holiday.

One-Person Companies (OPCs): FM proposed to incentivise incorporation of one-person companies, which will benefit startups and innovators. This move will allow such firms “to grow without restriction on paid-up capital and turnover, allowing conversion into any other type of company at any time, reducing residency limit for an Indian citizen to set up an OPC from 182 days to 120 days.”. This will also allow non-resident Indians to incorporate OPCs in India.

Foreign Direct Investment (FDI): Finance Minister announced a proposal to amend the Insurance Act, 1938 to increase permissible foreign direct investment limit (FDI) from 49% to 74% in insurance companies. This would allow foreign ownership and control of insurance firms in the country with certain safeguards. This is a good step that will provide growth impetus to the InsurTech startups. However, majority of directors on the boards of such companies and key management persons will have to be resident Indians, with 50% directors being independent directors and a specified percentage of profits being retained as general income.