Union budget 2021: Norms eased for startups
“The decriminalising of the procedural and technical compoundable offences under the Companies Act, 2013, is now complete. I now propose to next take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008,” Nirmala Sitharaman said.
Finance minister Nirmala Sitharaman on Monday revised the definition of small companies, eased norms for non-resident Indians (NRIs) to set up one person companies (OPC) to promote startups, and proposed that the government will decriminalise various procedural and technical compoundable offences under the Limited Liability Partnership (LLP) Act.
“The decriminalising of the procedural and technical compoundable offences under the Companies Act, 2013, is now complete. I now propose to next take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008,” she said in her budget speech.
The finance minister also said compliance requirements for small companies is being eased as the government is revising their definition under Companies Act, 2013, by increasing their thresholds for paid up capital from “not exceeding ₹50 lakh” to “not exceeding ₹2 crore” and turnover from “not exceeding ₹2 crore” to “not exceeding ₹20 crore”.
She emphasised the need to incentivise OPCs to encourage setting up of start-ups. “As a further measure which directly benefits start-ups and innovators, I propose to incentivize the incorporation of OPCs by allowing OPCs to grow without any restrictions on paid up capital and turnover,” she said.
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She proposed to allow conversion of OPCs into any other type of company at any time and reduced the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days, besides allowing NRIs to incorporate OPCs in India.
The budget also proposed to extend the eligibility for claiming tax holiday and capital gains exemption for investment in startups till March 31, 2022.
“Extending the eligibility for claiming tax holiday for start-ups and capital gains exemption for investments in start-ups by one more year - till 31st March, 2022 will help enable entrepreneurship and help create jobs,” said Harsha Razdan, partner and head — Consumer Markets and Internet Business — at KPMG in India.
“These measures are in lines with the government’s promised ease of doing business, which will usher in an entrepreneurial culture in the country,” Abhishek A Rastogi, partner at law firm Khaitan & Company, said.
Shubhradeep Nandi, CEO & co-founder of PiChain Labs said, “An increase in tax holiday for startups will help as a boost after the pandemic blues. Incorporation of OPCs without paid-up capital and turnover limitations will allow them to grow without compliance challenges and help get into the mainstream quickly.”