India Startup Tax Bill vs US CrowdFund Act

March 23rd, 2012 · No Comments · Finance, News, Politics, Technology

It is just a coincidence that two leading democracies in the world introduce two bills around startups, one which will encourage startups and one which discourages startups.

CrowdFund Act of US is designed to help the startups by making it easy to receive small amounts of investments from individuals also, while the Startup Tax Bill of India is designed to add 30% tax for all investments the startups receive from small investors.

In the US, CrowdFund Act was passed today which allows startups to raise up to 1 million USD a year through crowd funding. This also means that any one with less than 100,000USD per year income can invest upto 5% of their annual income towards any startup. If the salary of the individual is more than 100,0ooUSD per year, they can invest up to 100,000USD towards the startup. They are also provided the full details on how to do it right, the risks involved, etc.

In India, with the budget announcement this month, the Government has introduced Startup Tax Bill where startups will have to pay a tax of 30% of any investment raised from individuals as. (The only other option is to do it directly from a registered VC firm).

What an irony!

In the US, there is a huge amount of lobbying going on with representation on CrowdFund Act coming from three leading senators. They are actively participating in this process, to make sure the government helps startups in all possible ways, thus encouraging creation of more jobs in the long run.

In India, the government seems to be taking the startup world into a more painful journey with this bill introduced this month. The startups already have to focus on making sure their core idea is well represented, now they also have to make sure they convince the angel investors how 70% of their investment will be used to do the job, while the remaining 30% will be paid as tax to the government. At this rate, it is just going to make it more difficult for Indian startups to compete in the global startup market.

May be it is time for the small investors in India to invest in US based startups, which will not only boost the job market in the US (may be these investors should be given a temporary green card for such investments), it will also help them have better return on their investment. 🙂

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