The government can be an 'angel' if it replaces tax with incentives, explains a startup groomer

• In an interview with Business Insider, Dr. Apoorv Ranjan Sharma of Venture Catalysts spoke about policies the new government can bring about for startups.
• Angel tax has been one of the most hotly debated issues, and Sharma believes tax incentives will encourage angel investments.
• Sharma believes that in India, private incubators too need to be given incentives

One of the biggest debates in the Indian startup ecosystem has been angel tax. From pleas to removal of the tax to outrage over issued notices, startups in India along with angel investors have pleaded to the government for better policies ahead of the upcoming budget on July 5.

In February, the Indian government came up with a decision regarding angel tax. The exemption for angel tax for shares issued or proposed was hiked to an aggregate limit of ₹25 crore from ₹10 crore.

However, that is not enough. As the new government begins work, investors and entrepreneurs are once again hopeful for better, encouraging policies.

In an interview with Business Insider, Dr. Apoorv Ranjan Sharma, co-founder & president, Venture Catalysts spoke about policies that the Indian government needs to bring about. Venture Catalysts, as an integrated incubator based out of Mumbai. It provides investment of $500,000 to $1 million per startup with incubation support for one year.

“People are talking about removing angel tax but just doing that is not okay. We need to incentivise angel investors, like is the case in some other countries. This policy needs to go in that direction,” said Sharma.

He further explained that with startups, especially in the early stages, being a risky asset, it’s a difficult investment to make. “Tax rebates need to be given to angel investors to encourage them to invest. The government can define who can be an angel investor,” he said.

In fact, the Department for Promotion of Industry and Internal Trade (DPIIT) is already working on the definition of accredited investors, who could be given tax incentives for investments.

Another factor that boosts startups is incubation. Sharma believes that in India, private incubators too need to be given incentives. He cites the example of the US and China, where successful incubators and accelerators are the private ones.

“Infrastructure costs are high to set up an incubator. In India, there are so many government-funded incubators coming up but the outcome is limited then. Private incubators should be encouraged either with land benefits to set up or tax incentives,” he said.

He further said that India doesn’t even need a startup ministry, what it needs are fundamental changes.

The Modi government has come back to power with a resounding majority in the Parliament, including the Rajya Sabha. This will give the seemingly “pro-startup government” an opportunity to show that it is serious about promoting entrepreneurship in the country. And the upcoming Budget may be the ideal opportunity.

See Also:
Indian government finally comes to a decision on Angel Tax, changes definition of startups
Two Indian startups say the government broke their faith by raiding their bank accounts