No Angel Tax, 3-Year Blanket Pass to New Firms: Rahul Poll Promise

“For the first three years of setting up a new business, we are going to free you up from red tape,” Gandhi said

Rahul Gandhi said Modi’s promises were never meant to be implemented.

(Photo: The Quint)

Unveiling his economic agenda, Congress President Rahul Gandhi on Thursday, 29 March, said if voted to power his party will cut red tape for businesses, exempt new enterprises from seeking any permission in first three years, make it easier to get bank loans and scrap angel tax on start-ups.

In an exclusive interview to PTI a fortnight ahead of the first phase of the Lok Sabha polls starting April 11, Gandhi said his government's focus will be on job creation and that entrepreneurs will get fiscal and tax incentives based on their ability to create jobs.

These will form part of Congress party's election manifesto that will be released next month, he said.

“For the first three years of setting up a new business, we are going to free you up from red tape. You will not need to ask for permission for anything,” Gandhi said. “Don’t bother about anything, there is no permission you need. Start your business, get to work.”

‘Angel Tax Ill-Conceived and Draconian’

Prime Minister Narendra Modi has often been accused of giving a jobless economic growth and Gandhi's emphasis on cutting red tape and removing bureaucratic hurdles for starting business a is aimed at wooing youth wanting to start new ventures as well as create jobs.

"We've said that we will remove the draconian and ill-conceived angel tax. I have made that commitment and it's going to be done," Gandhi said.

Since 2012, start-ups were conditioned to what is called angel tax on the premiums obtained over their fair market value.

According to a new section introduced to the Income Tax Act in 2012, if a closely held company issues shares at a price more than its fair market value, the excess amount will be taxed at 30 per cent, as income from other sources.

However, sometime last year, the Income Tax department started to send notices to various startups on investments received by them from angel investors. Since then this tax has been coined angel tax.

Last month, the government relaxed the angel tax norms by giving a blanket exemption for up to Rs 25 crore of capital raised by DIPP registered startups from any sources. Capital beyond that will be taxed.

‘How Many Jobs Has Nirav Modi Created?’

Gandhi said this "powerful idea" came after he held discussions with several entrepreneurs, during which they stressed that their biggest problem was getting all kinds of permissions from different agencies before starting their enterprises.

The entrepreneurs said different agencies ask lots of questions and bribes, and hence “we said, we believe in you; we trust you, and so for the first three years of setting up a new business, we are going to free you up from the red tape”.

The Congress president said another idea that came up during discussions with entrepreneurs was the opening of the banking system to young business-persons and providing them access.

“Why should only Nirav Modi get thousands of crores? How many jobs has he created in India? Why can’t a youngster who wants to start a business, who wants to give India 2,000 jobs, get a bank loan,” he asked.

"Solid incentives and tax credits will be given to new entrepreneurs based on how many jobs they create," the Congress chief said.

Gandhi said the party is putting together a manifesto after several rounds of discussions with stakeholders and reflecting their suggestions in the party's manifesto, which will include many such things to promote business, farming, employment generation etc.

The party, sources said, will release its manifesto in the coming week.

Former finance minister P Chidambaram heads the party's manifesto committee that is giving final touches to the manifesto. The panel has held several rounds of consultations in at least 150 locations across the country in the last several months in the run-up to polls.