New Delhi: India's entrepreneurs and startups have high hopes from the upcoming Union budget which will be presented early next month. Startups have sought less compliance, more direct support coupled with tax relief and easy credit for their users from finance minister Sitharaman as these measures will enable them to thrive in the post-Covid world.
Amit Agrawal, who founded OckyPocky, an interactive app to teach English to pre-school children from non-English background, says the government should support the para-education industry by announcing more relief to end users in the upcoming budget.
Covid-19 induced lockdowns and suspension of classes led to unprecedented growth of the startups catering to the education sector.
These startups, known as edtech companies, offer a range of services such as improving mathematics and English skills, helping in preparation of competitive exams through interactive apps.
However, in absence of support from the government, affordability remains a concern as the vast majority of India's low and middle-income families living in tier-II and tier-III towns cannot afford their services, clearly reflecting a digital divide in the education sector.
India's edtech startups include unicorns like BYJU's, and other prominent edtech startups like Unacademy, UpGrad, Toppr, NextEducation, and Don't Memorize among others.
OckyPocky founder Amit Agrawal, who was country head of YouTube India before joining the startup bandwagon, says affordability for middle-class salaried parents, particularly in small towns and cities, remains a big issue.
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"If the government allows parents some more benefits on the tuition fees paid by them by including the money spent on para-education under the Section 80C of the Income Tax Act then it will be a big breakthrough," said Amit Agrawal.
Under section 80C, a parent, guardian or sponsor, is allowed to claim a deduction of up to Rs 1.5 lakh from the income in a financial year on the money spent as tuition fee of a school, college or university. However, this relief does not cover related expenditures like development fees, transportation fee or the fees paid to edtech companies.
"The finance minister should consider this thing in the budget. It should allow up to 100% deduction of such expenditure," Amit told ETV Bharat.
Union budget not only contains the tax proposals and an account of the government's finances, the finance minister also announces a slew of other measures to boost different sectors of the economy.
Amit Agrawal says the government should also announce some schemes in the budget, which will enable parents to take easy loans for this kind of new formats of education, particularly for early education.
"At present, it is done at the college level as banks are able to see the profit at the end of college education. A student is supposed to get a job and banks can forecast a cash flow," said the entrepreneur.
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"But this kind of loan support is not available for early education which is foundational in nature," Amit said. "It will allow more private players to come in the education and up-skilling market which will bring down the cost."
Reduce compliance burden on startups
Young entrepreneurs like 25-year-old Nikky Kumar Jha from Bhagalpur in Bihar, who founded an agri innovation startup SaptKrishi and launched an affordable vegetable preservator Sabji Kothi (vegetable box), expect that finance minister Nirmala Sitharaman will announce some specific relief measures for the startup sector, a favourite initiative of Prime Minister Narendra Modi.
Prime Minister Narendra Modi launched Startup India initiative in January 2016 to promote innovation and entrepreneurship in the country and then finance minister Arun Jaitley announced a series of measures in the budget to support the initiative, including tax breaks.
Jha, who registered a private limited company in 2019, a year after completing his masters in ecology and environmental studies from Nalanda University, highlights the problems faced by startup founders like him.
"Despite being a government recognised startup, we need to fulfil all the compliances like any other company in terms of filing income tax returns, MCA returns. This compliance cost takes up to Rs 50,000 to Rs 1 lakh a year which affects our cash flow," he said.
"We are in the nascent stage, we are bootstrapped, we can't afford this kind of compliance burden," Nikky Jha told ETV Bharat.
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In order to overcome this problem, he advises the creation of a new class of companies which could be announced in the budget.
He says this new class of companies could have the term 'startup' suffixed with their names, which will not only allow them to get instant recognition from the DPIIT but also subject them to bare minimum compliance burden.
"Like the one-person company (OPC), the government should announce a new class of companies, a startup company in the budget," he told ETV Bharat.
As reported earlier by ETV Bharat, the law committee of the ministry of corporate affairs early this month recommended the creation of a new class of LLPs by amending the LLP Act of 2008 to reduce the fees, penalty and other compliance requirements for them.
The panel suggested that these LLPs, which will have a turnover of less than Rs 40 lakh in a year or contribution of less than Rs 25 lakh, should be subjected to a less stringent compliance regime, which will encourage incorporation of partnership firms, proprietorship firms.
The young entrepreneur from Bihar also highlights another problem faced by people like him.
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He says though the government subsidises the fees paid by a startup to a patent attorney for registration of a patent but the patent attorney will only reimburse it once he receives it from the government.
“It affects my cash flow as I’m required to pay the money upfront and cannot plan my future expenses on this basis as I don’t know when it will be refunded to me,” he said.
In order to reduce the cost of compliance for startups, Nikky Jha says the government should also subsidise the audit fee paid by a startup to a chartered accountant.
"In case of the fees paid to a government-approved patent attorney by a startup, the government bears the 90% cost of the fee. Similarly, they should subsidise a part of the audit fee paid to be paid to the chartered accountant," he told ETV Bharat.
Nikky Jha has received funding and grant from Nidhi Prayas incubation fund managed by the IIT-Kanpur and funding commitment from the Bill & Melinda Gates Foundation for his venture.
