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Wireless Utopia

The journey towards a free wireless world.

Tax Break

Thursday, February 16, 2006

Its the Bugdet Season here in India once again and the industry is busy will all kinds of proposals for our finance minister. Each sector uses its own muscle to get thier proposal into the budget. The Software Industry also has such a body called the NASSCOM and plays an important role in formulating the IT Policy of the Government.

One of the main focus of Nasscom is to promote Innovation and Enterpreneurship in the IT Industry and it has a forum for it. Even a list of VC's have been provided. An Award programme also has been instituted. But the surprising omission is that no Tax Breaks have been to startups at all.

Amongst all the difficulties that Startups face, one is to attract good talent. Most of the recruitement happens through word of mouth and aquaintances rather than the formal process. During the gestation period when money is hard to come by, its difficult to compete for talent with established players. As an incentive, a tax break can be offered to the employees. For all employees of startups the tax should be waived off till they start showing profits.

It would be a win-win proposition since its in the interest of the government to nurture the startup. The startup's investment to profit ratio is generally much higher than the established companies. If they become sucessfull it would mean more money for the government coffers. Even one good startup can make up the losses suffered due to the exemption.

Product based companies are on the rise in India. Although services is still the backbone of the industry, there are more and more product based startups coming up. As the numbers grow a tax break will provide a much needed shot in the arm for them.
posted by Rajiv, 6:51 AM


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