Shaping a Positive Business Landscape in Budget 2024

Shaping a Positive Business Landscape in Budget 2024

By Rakesh Raghuvanshi, Founder and CEO, Sekel Tech 

With the impending Union Budget 2024 announcement on February 1, the entrepreneurial community is actively engaging in a constructive dialogue, putting forth nuanced expectations for reforms that would fortify the business environment. One of the primary concerns drawing attention is the taxation of Employee Stock Options (ESOPs) for startups.

Presently, the budget lacks specific provisions offering relief to startups, leading to a taxation burden on employees of unlisted companies even before realizing any liquidity from exercising options. This dynamic has repercussions on talent acquisition and retention for cash-strapped startups and instigates investor hesitation due to unclear ESOP tax implications. A thoughtful proposal suggests exploring alternatives such as deferring taxation on exercised ESOPs until liquidity events or introducing a graded tax system based on holding periods.

Another pivotal consideration is the differentiation in Capital Gains tax rates between listed and unlisted shares. This divergence creates an uneven investment landscape, potentially hindering investments in unlisted companies and impacting the growth trajectory of startups and early-stage ventures. Entrepreneurs advocate for parity in capital gains tax rates for both listed and unlisted shares, not as a complaint but as a strategic move to foster a more balanced and equitable investment environment.

The uncertainty surrounding Alternative Investment Fund (AIF) taxation has also caught the attention of the entrepreneurial community. The lack of clarity on guidelines affects investor confidence, potentially impeding investments in AIFs, crucial for channelling capital into various sectors, including startups. Entrepreneurs propose the necessity for clear and comprehensive AIF taxation guidelines, emphasizing that this step would not only boost investor confidence but also attract capital to diverse segments, contributing to overall economic growth.

The ongoing discussions around the discrepancies in tax rules for service export payments (SEP) and export license (EL) levies highlight the need for streamlined regulations. These disparities can lead to confusion and compliance burdens, inadvertently affecting export-oriented businesses. Entrepreneurs, in a balanced approach, advocate for uniformity in tax regulations for SEP and EL levies, recognizing the potential benefits of simplifying compliance processes and fostering international business growth.

A potential expansion of the angel tax to foreign investors, while on the horizon, raises thoughtful concerns within the business community. Entrepreneurs express the need for clarity and specific details on the potential impact of an expanded angel tax on foreign investors. This is not a complaint but a prudent call for a well-defined threshold or exemptions to ensure a continuous inflow of capital, maintaining a healthy environment for entrepreneurship.

In actively engaging with these concerns and proposing constructive solutions, the business community aims to contribute positively to shaping a policy environment that supports Indian businesses, particularly startups. The aspiration is that the Union Budget 2024 will take cognizance of these considerations, fostering an environment conducive to growth, innovation, and sustained entrepreneurial success. The tone is not one of complaint but of collaboration, recognizing the shared goal of a thriving business landscape.

Rabindra

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