Startup founders in Bengaluru are pitching in their demands for startups to the government that comes into power. Their three demands include ironing out the angel tax for startups who have received notices, second is to create a balance between state and central government and offer regulatory clarity on emerging business models. The third is as simple as reducing paperwork for startup entrepreneurs.
The government earlier came up with a regulation that will exempt companies from angel tax in the future. But there isn’t clarity for companies that have received a notice. About 2,000 startups received notices in December when the companies were asked to pay “angel tax”—a tax on startups that receive an equity infusion in excess of their “fair valuation”. The government then modified the language and relieved the companies of this tax, but companies that had received notices will still have to go through an appeal.
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Regulatory clarity for startups coming up with innovative business models is paramount. “The issue is not which government is ruling, but how open are the central and state governments to new ideas,” said a startup entrepreneur.
“The government needs to be a bit flexible and have provisions for new ideas and even if existing frameworks don’t support the innovation. They need to give a new idea some breathing space, while setting some metrics if they want to regulate a particular industry,” he said, citing the recent suspension of cab aggregator Ola’s licence as it ran bike-taxi pilots, which are not allowed in the state.
Startup entrepreneurs have also faced a huge burden of paperwork. The suggestions came in that the government should regulate paperwork atleast initially.
Several investors are also of the opinion that these aren’t the biggest obstructions in the growth and expansion of a startup in the Indian startup ecosystem.