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#Budget2013: Funds For Technology Incubators In Academic Institutions Get CSR Status; Startup Tax

In his budget speech earlier in the day, the Finance Minister P.Chidambaram announced that the funds provided to Technology Business Incubators (TBI) based within academic institutions and approved by the Ministry of Science and Technology or the Ministry of Micro, Small and Medium Enterprises, will qualify as CSR (Corporate Social Responsibility) expenditure.

This proposal follows amendments to the Companies Bill (pdf) in December 2012, which mandates corporate companies to spend 2% of its net profits as CSR. Therefore, this proposal will allow companies to invest up to 2% of its net profits in startups incubated in technology business incubators and account for it as CSR expenditure.

As of now, there are around 27 technology business incubators located inside academic institutions like National Institute of Design (NID), Indian Institutes of Technology (IIT), National Institutes of Technology (NIT), Indian Institutes of Management (IIM), Engineering colleges and other technical universities in the country. These incubators were set up by the National Science & Technology Entrepreneurship Development Board (NSTEDB), which was established in 1982 by the Government of India under the Department of Science & Technology.

Some of the companies which have incubated out of some of these incubators include Uniphore, Milaap, and MeshLabs among others.

Angel Funds to be included in Category I AIF:

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Last year, the government had introduced few clauses to Budget 2012, according to which if an investment received by a private company or an unlisted public company in return for shares, was in excess of the Fair Market Value (“FMV”) of the shares, it was to be considered as income in the hands of the company and chargeable to tax as “income from other sources”. This essentially meant that investors will be charged 30% income tax on this income.

In lieu of protests against this startup tax by the startup ecosystem, the government has now amended this clauses to exclude registered venture capital funds and angel investors from these clauses. The minister said that SEBI will prescribe requirements for angel investor pools, by which they can be recognised as Category I AIF (alternate investment funds) venture capital funds and angel funds can register with the SEBI to get exempted from these taxes.

Related: Budget 2013-14: Digital Business Expectations & Announcements – Live Updates

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