Budget 2016: Here’s why startups should not worry about expenses on brand building

If you are thinking of building the brand of your startup and fretting over taxes, Finance Minister Arun Jaitley may have some good news for you.

The Finance Ministry is mulling to give beneficial tax treatment to brand building expenses of the startups.

If everything goes as planned, startups and e-commerce companies will be allowed to have initial brand building expenses with benefits.

"The AMP expenses are very important for e-commerce companies to acquire new customers. A major part of these expenses is intangible and the government should allow identified category of AMP expenses to be capitalised," said KPMG (India) Partner Tax Amarjeet Singh.

Experts say that expenditure in advertisement, marketing and sales promotion (AMP) should be an intangible asset.

Such a move, according to Ashok Maheshwary and Associates Managing Partner Amit Maheshwari, would help reduce the losses and prevent net-worth erosion of the company.

The government has decided to give host of tax incentives to encourage startups and some decisions are likely to be announced by Finance Minister Arun Jaitley in the 2016-17 Budget, to be presented on February 29.

"Further, relaxation of withholding tax compliances by e-commerce companies, which are more in the nature of the startups, would enable them to focus more on the business with the reduced administrative burden resulting from relaxation," Deloitte Haskins & Sells LLP Partner CA Gupta said.

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