- Amendment in Section 54GB of Income Tax Act:
The Union Budget 2019-20 proposed to allow for exemption from tax on long term capital asset being residential property on investment of proceeds of such transfer in subscribing equity shares of a Startup.
a. The condition of minimum holding of 50% of share capital or voting rights in the start-up is proposed to be relaxed to 25%
b. Extension of benefit under section 54GB shall be available for sale of residential property on or before 31st March 2021
c. Condition restricting transfer of new asset being computer or computer software is proposed to be relaxed from the current 5 years to 3 years
- Amendment in Section 79 of Income Tax Act:
The Union Budget 2019-20 proposed to enable startups to carry forward their losses on satisfaction of any one of the two conditions:
a. Continuity of 51% shareholding/voting power or
b. Continuity of 100% of original shareholders.
Earlier the condition was for all the shareholders of the startup who held shares carrying voting power on the last day of the year or years in which the loss was incurred, to remain the same.
- Pass through of losses for Categories I and II Alternative Investment Funds:
The Union Budget 2019-20 proposed to allow pass through of losses in cases of Category I and II AIF similar to pass through of income which is allowed at present.
- Exemption to Category II AIF from provisions of section 56(2)(viib) of Income Tax Act:
Presently, the investment made by Category-I AIF is exempted from the applicability of the provisions of section 56(2)(viib) of the IT Act. The Union Budget 2019-20 proposed to extend this exemption to Category-II AIF as well.
- Amendment in Companies (Share Capital and Debentures) Rules, 2014:
The Ministry of Corporate Affairs issued a notification on 16th August, 2019 increasing the period in which ESOPs could be granted to promoters and directors (holding more than 10% equity) of Startups, from 5 years to 10 years from the date of incorporation and thereby aligned the provisions of the Companies (Share Capital and Debentures) Rules with the provisions referred to in the DPIIT notification dated 19th Feb, 2019.
The notification also escalated the limit on shares with Differential Voting Rights in the Company from 26% of the total post-issue paid up equity capital of the Company to 74% of the total voting power. Further, the condition for the company to have consistent track record of distributable profits for the last three years for issue of DVR shares has been removed.
- Taxation Laws (Amendment) Ordinance 2019
CSR 2% fund can be spent on incubators funded by the Central or State Government or any agency or Public Sector Undertaking of the Central or State Government and making contributions to public-funded Universities, IITs, National Laboratories, and Autonomous Bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.
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