India’s Only Startup Investment Incentive Is More Red Tape Than Red Carpet

In no other situation is this partial break more evident than in the income tax benefits for startups and for investors into startups, Section 54GB of the Indian Income Tax Act, 1961. Touted before the budget as a tax break for investing into Indian startups, section 54GB can best be summed up from Macbeth, Act 5, Scene 5 – “full of sound and fury, signifying nothing.”This paper tiger of a clause exudes the erstwhile License Raj of India – a byzantine series of needless complications which seem attractive in theory but are untenable in practice.In principle, the clause gives a tax exemption of INR 50 lakhs (a small sum) for the investment of any capital gains into an eligible startup. But where it errs is in the compendium of conditions that dilute the effect this clause would have had in galvanising startup investment in India.