Budget 2014: Tax exemption for angel funding top wish list of early stage investors

The Narendra Modi-led government, which took over a month ago, surprised the startup ecosystem by adding ‘entrepreneurship’ as a part of a dedicated ministry, along with skill development, youth affairs and sports. But the stakeholders are looking for much more than that to solve the ground level pain points.

In particular, the early stage investors want to see tax exemption on angel investment, which is used to support startups as initial external funding. Such investments are also critical to help firms grow to a critical mass to attract larger VC funding.

Here’s a quick take on the wish list of early stage investors from the Union Budget next week.

Samir Kumar, MD, Inventus Capital Partners

I hope that the Budget will be investor friendly, and will pave the way for a flood of investment to enter the Indian market. Additionally, I expect the government to correct the issues with the new Companies Act that places onerous requirements on private companies. The Modi government also needs to create certainty around taxation events, and end ambiguity, retrospective amendments, etc, and ease the norms around angel funding.

Alok Mittal, angel investor and MD, Canaan Partners

I expect the government to make clarifications on ‘angel tax’, and exemption for genuine angel investments. The government also needs to take concrete steps to ease the process of doing business, especially for startups (there have been verbal indications around this). Besides, there should be tangible allocation and objectives for the newly set up Ministry of Entrepreneurship.

K Ganesh, serial entrepreneur and co-founder and chairman of Portea Medical

The government must show it is committed, both in letter and spirit, to making long-term changes to boost the startup eco-system and entrepreneurship in the country. The new government has already demonstrated its intent by creating a separate ministry for entrepreneurship. However, a lot more needs to be done on the grounds, in terms of government support for setting up businesses, ensuring smooth operations, fundraising and enabling businesses to scale up.

There are five things that I would like to see the Budget specifically addresses—first, easy availability of soft loans without collaterals or personal guarantees; second, making bank lending and debt easier for startups; third, tax breaks for angel investments; four, making incubation expenditure mandatory - just like CSR spends are compulsory out of profits; and finally, subsidise the costs for startups that provide employment above a certain threshold. 

(Edited by Joby Puthuparampil Johnson)

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