India’s Digital biz give Budget a thumbs up
Published 1 February 2021
Proposals pertaining to startups in India’s annual budget got a thumbs up from the industry.
IT industry body National Association of Software and Services Companies (NASSCOM) has given its thumbs up for the proposals announced in the Union Budget, which lasted almost two hours. The Budget presented by Finance Minister Nirmala Sitharaman, announced setting up of a fintech hub and the allocation of Rs 1,500 crore ($200 million) to provide financial incentives for companies in the digital payments segment.
“These are certainly positive steps towards realizing a cashless economy,” said NASSCOM. Others agree. “The incentive of Rs. 1,500 crore for digital payments is a move in the right direction. We are eagerly waiting to see what the scheme entails and how the industry can benefit from it,” according to Dilip Modi, Founder of Spice Money, a fintech company.
These companies are also hoping that a part of the fund goes towards fostering the banking correspondents (BC) network by introducing reimbursement schemes or alternatives to zero merchant discount rates (MDR) which has hampered the growth of the network and the payments ecosystem. In rural parts of India, which does not have banks, a BC is a person who disburses cash on behalf of the bank.
“We also expect the scheme to have provisions for device subsidy to strengthen the micro ATM infrastructure in rural India. We believe it will accelerate the transformation towards an Aatmanirbhar (self-reliant), Digital India and bring about financial inclusion for underserved parts of India,” added Modi.
The proposal to amend apprenticeship law to boost skilling is a welcome step to further enhance employability in the country. “At NASSCOM we have been emphasising the importance of India as the hub for digital talent and innovation and are glad to see the increased focus on innovation and skilling,” the industry body said.
Start-ups and SMEs play a critical role in defining India’s growth story. Start-ups got the much-needed tax holiday for another year which is bound to bring in major respite for small and medium sized businesses. The government also announced a Rs 1,500-crore scheme to incentivise digital payments. Innovators and entrepreneurs will now be allowed to form one-person companies without restrictions, paid-up capital, or turnover norms.
While there have been steps taken such as incentivising incorporation of one-person companies and the extension of claiming tax holidays and capital gains for one more year, this was a perfect opportunity to do something disruptive for the sector, like extending the available tax holiday of 3 years to all start-ups registers under DPIIT, which would impact over 40000 start-ups in the country, NASSCOM noted.
NASSCOM has also sought clarity from the government to provide on providing a framework in direct taxes and indirect taxes for the industry to adopt Work From Home/remote working on a long-term basis. “We require WFH to be enabled in SEZs on a long-term basis. Since this requires movement of duty-free goods like laptops etc outside the SEZs, the Finance Ministry should provide the requisite clarifications under Customs and GST,” noted NASSCOM.