'One Person Companies to boost startup ecosystem of the country'
Union Budget 2021-22 has been structured to further shape the startup ecosystem, says HostBooks founder Kapil Rana
The recent proposal in Budget 2021-22 to incentivize the incorporation of One Person Company (OPC) will boost the startup ecosystem of India by attracting more entrepreneurs and investors, said Founder and Chairman of HostBooks Limited Kapil Rana.
In an exclusive interview with India News Network, Rana said, “Before the budget announcement, only Indian citizens could incorporate one person company but now after the announcement, Indian citizens, as well as NRI, can incorporate a one-person company. This will be a boost for the start-ups because now a person whether resident or non-resident can open a one-person company and also the Government has announced that, now there is no restriction on paid-up capital and turnover.”
“This move will attract more entrepreneurs and innovators to test the Indian start-up system. These changes will enable more start-ups to come up and more innovations to take place and it will boost enterprises,” he added.
One Person Company (OPC) means a company that has only one shareholder as its member. The member should be a natural person who is an Indian citizen and stay in India for 182 days or more in the immediately preceding calendar year.
In Union Budget 2021-2022, Finance Minister Nirmala Sitharaman proposed to incentivize the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid-up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non-Residential Indians (NRIs) to incorporate OPCs in India.
Commenting on how the move will benefit the NRIs, Rana said, “This announcement will ultimately provide benefits to the start-ups and Innovators in the incorporation of one-person companies. It will reduce the compliance burden of NRI for the incorporation of an OPC.”
In addition to the amendments on OPCs, Union Budget also proposed some tax Incentives for startups and innovators like claiming tax holiday till March 31, 2022. The paid-up capital of small firms has also been increased to Rs 2.50 crore from Rs 50 lakhs.
To boost credit access for small businesses and Micro, Small, and Medium Scale Enterprises (MSMEs) development financial institutions (DFI) with an outlay of INR 20,000 crore is being set up.
The steps are an addition to previous startup-focused measures announced by the government, including broadening their startups, simplifying regulations, providing income tax exemptions, and setting up a Rs 10,000 crore Fund of Funds run by Sidbi.
The government also recently approved the Startup India Seed Fund Scheme with a corpus of Rs 945 crore. It is aimed at providing financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
Speaking about the measures taken by the government to boost the startup ecosystem even amid the Covid-19 pandemic, Rana said, “Being an owner of a start-up company, I think this budget is well focused for start-ups and MSMEs especially for promoting domestic manufacturing. Because all restrictions on paid-up capital and turnover have been lifted off, now OPC can convert into any other type of company without any time limit, there is development financial institutions (DFI) is being set up to boost credit access for small businesses and MSMEs and another benefit like tax holiday and capital gains exemptions also provided to this sector through this budget. Therefore, I will take the full benefits of this opportunity in growing my business.”
Digitization has become a way of living in India and has given a big boost to the economy during the times of the pandemic. To further the impact, in Budget 2021, the Finance Minister has proposed INR 1500 Crore to promote digital modes of payment.
Maintaining that the move is an opportunity for Fin-tech companies to further the digitization process in India, Rana said, “It is a kind of great move taken by the Government to promote e-payments in smaller cities and as well as innovation by Fin-tech companies. These funds will provide lots of opportunities to Fin-tech for innovation that leads to large-scale adoption even in the smallest of towns and villages which will ultimately boost the Indian economy.”
“Fin-tech companies will use these funds in developing a new application that is easy to use, flexible, and can make people’s lives more secure. An application that provides more convenient ways to make payments online will help in boosting the Indian economy,” he added.
In his final comments on the budget, Rana noted that this budget is focused on “innovation, skill development, and digital governance and provides every opportunity for the economy to capture the pace and grow sustainably in the situation in which India has been through a major economic slowdown amid Covid-19, therefore this allocation will improve the scenario and boost the recovery process as well.”