IT industry body Nasscom has said the slew of incentives announced for startups in the Budget will help facilitate funding and reduce the regulatory and tax compliance burden on these fledgling enterprises.

As part of the Budget, the government has proposed a host of incentives, including a special arrangement for resolution of pending assessments of income tax cases, with a view to encouraging startups.

“Doing away with the scrutiny of valuation of documentation on angel tax is an excellent step that will help facilitate funding... With this Budget, startups can expect lesser regulatory requirement, besides reducing their tax compliance burden,” Nasscom Executive Council member Kunal Bahl said.

He said it will also encourage newer startups, especially from tier II and III areas, and in parallel infuse considerable foreign investments in India.

In her Budget speech, Finance Minister Nirmala Sitharaman had stated that startups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums — a move aimed at resolving the so-called ‘angel tax’ issue.

She had also said the issue of establishing the identity of the investor and source of his/her funds will be resolved by putting in place a mechanism of e-verification and with this, funds raised by startups will not require any kind of scrutiny from the Income Tax Department.

Bahl, who is also the co-founder of e-commerce major Snapdeal, pointed out that the startup ecosystem in India has long been reeling from three challenges — high credit cost, lack of adequate and timely funding.