Recently revealed budget 2022-2023 announced a tax tweak that will likely benefit venture capital investors and startup founders. The tax has been capped at 15% on long term capital gains (LTCG) for all the listed and unlisted companies, quoted by Nirmala Sitharaman, Finance Minister.
This change addresses a long-standing issue that new companies demand of the modern era to share sales of unlisted items of unlisted firms to be taxed at par with those listed in the budget. The surcharge that was earlier 37.5% which has been reduced to 15% on unlisted share sales, however, the tax remains unchanged at 20% as earlier.
Subsequently, the government has also extended tax incentives that it offers to new startups for the first 3 years of their incorporation. With the help of this, all the startups that started between April 1st 2016 to March 31st 2023 are eligible to claim tax benefits for three consecutive years with the first 10 years of their operations. Nirmala Sitharaman said that this has been done so that new startups grow without any hindrance in the country due to the impact of pandemic throughout the world. This would help them achieve the desired driving growth that every startup aspires for. She also said that an expert committee would be appointed and set up to examine measures to boost venture capital and private equity investments in startups across the country.