Budget 2021: What is Tax Holiday and how it will benefit startups in India?
A tax holiday is an incentive program run by the government. It helps to stimulate foreign investment by reducing taxes on businesses. The objective is to encourage economic activity and foster growth.
The Modi government on Monday proposed extension of the eligibility for claiming tax holiday and capital gains exemption for investment in startups till March 31, 2022. Finance Minister Nirmala Sitharaman in her speech said that the extension in eligibility for claiming tax holiday will incentivize startups in the country.
What is Tax Holiday?
A tax holiday is an incentive program run by the government. It helps to stimulate foreign investment by reducing taxes on businesses. The objective is to encourage economic activity and foster growth.
The government's decision to extend the eligibility for claiming tax holiday will increase long-term tax revenue because they help businesses grow operations. A tax holiday is often temporary and revised by the government from time to time.
Mishu Ahluwalia, COO & Investor Relations at KIWI “Real-time Freelancing Platform”, said that the startup sector is gifted with the Tax Holiday in the budget. It will push more investments and help India's startups beat pandemic blues.
"Startup sector is gifted with the Tax Holiday with the extension in eligibility for one more year. The tax exemption on capital gains till March 2022 will push more investments," Yogita Tulsiani, Director and Co-founder iXceed Solutions, said.
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Anshul Gupta of YellowClass said termed the Budget as very progressive and forward looking. Gupta said that the government has been supporting startups and business innovation for years and the budget continues to keep the focus sharp.
"Extension of tax holiday for startups is a welcome step," Gupta said.
Priyanka Madnani of Easy to Pitch said that the decision will definitely benefit the startups "as we all know that tax increases when investment happens". "So this would give a rebate till March 2022 and startups could utilise this benefit and come back to action."
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