Startups get extended tax holiday, a new one-person company rule, but the ESOPs tax remains as it is

Feb 1, 2021

By: Sanchita Dash

Finance Minister Nirmala Sitharaman today presented the Union Budget

Here’s what she announced for startups

Credit: BCCL

The threshold defining small companies expanded in a big way

The limit for paid-up capital increased four fold, and the turnover limit increased 10 fold.

Credit: Unsplash

'Small companies' will now be defined as

Those with paid up capital not exceeding INR 50 lakh to not exceeding INR 2 crore

Credit: BCCL

'Small companies' will now be defined as

Companies whose turnover is between INR 2 crore and INR 20 crore.

Credit: Unsplash

Government to support a world-class fintech hub

It will be set up at the Gujarat International Finance Tec (GIFT) City.

Credit: Unsplash

Government to now allow one-person companies (OPC)

Innovators can now form 1-person companies without restrictions, paid-up capital, or turnover norms.

Credit: Unsplash

NRIs also allowed to set up OPCs

The minimum days of residency needed before setting up a company has been reduced to 120 days from 182 days.

Credit: BCCL

A welcome step, says Anup Jain of Orios Venture Partners

"A welcome move for startups as 2 directors were needed and founders were forced to co opt others under the Companies Act,” he said

Credit: BCCL

Startups get another year of tax holiday

Eligibility of claiming tax holiday extended by one year until March, 2022.

Credit: Unsplash

Capital gains exemption for startup investment too get an extension

Finance Minister extended capital gains exemptions by one more year till March 22

Credit: Unsplash

However, a big wishlist was ignored

Startups who wanted tax exemption on ESOP sale, saw that being ignored in the Budget.

Credit: Unsplash

Check out Business Insider’s coverage of Budget 2021

Credit: BCCL

Top stocks to watch out for on March 8