Page 52 - Union Budget_2019

Union Budget 2019

10.15 Incentives for start-ups

As per the existing provisions under Section 79, the loss incurred by an eligible start up referred under

Section 80-IAC shall be allowed to be carried forward and set off only if

• shareholders hold the same number of shares as on the last day of the year in which loss is incurred

and last date of the previous year in which set off is to be done and
• such loss has been incurred during the period of 7 years from the date of incorporation.

To facilitate the ease of doing business in case of an eligible start up, it has been proposed to amend Section
79 to provide that in case of closely held up eligible start-up, an additional condition of change in

shareholding not exceeding 49% in the year of loss being incurred and the year of set off shall be available
apart from the above two conditions and the eligible start-up has to satisfy either of the two conditions.

Further, the existing provisions of Section 54GB enables the assesses to claim exemption in respect of long-

term capital gain arising from transfer of long-term capital asset being a residential property upon
investment in eligible startups. However, this benefit is available only till 31.03.2019 and there are various

conditions in terms of assessee having more than 50% of share capital, restriction for eligible start-ups on
transfer of assets purchased from investment made by assessee, amongst other things.

In order to incentivize investments in eligible startups, it is proposed to amend so as to

• Extend the sun-set date of transfer of residential property for investment in eligible start-up from

31.03.2019 to 31.03.2021
• Relax the condition of minimum shareholding from 50% to 25% of voting rights or share capital to
be held by assessee in eligible start-up after subscription of shares

• Relax the condition restricting transfer of new asset being computer or computer software from the
current 5 years to 3 years.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the

assessment year 2020-21 and subsequent assessment years.
Shareholding patterns tend to change as and when the start-ups grow. By recognizing the proposed

amendments, Government has provided breather to startups which shall now enable the potential
startups to overcome the initial difficult phase by diluting the conditions for exemptions.

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