An economy grows leaps and bounds when many new people get additional spending power. We’ve seen that happen in China and the positive effects of disposable income increasing. The amount collected from income tax is very low in India. A very small % of the population pays this tax and most non-salaried people find smart ways to avoid paying this tax. Of the salaried, majority of the people paying tax are in the lower rung. As a result the have-nots get axed. Instead if we could increase the lowest tax bracket from 2.5 lakhs to 6 lakhs, that could help increase disposable income for the majority. Taxes could shift more towards consumption rather than on earnings. Even abandoning income tax for people and increasing it on luxury consumption could have a huge effect in giving a fillip to the economy.
Many startups have been getting notices for having raised angel funding. Angel funding is one of the most riskiest investments. Angels bet on very young startup entrepreneurs on the basis of a future promise and encourage the development of new enterprises. Taxing such young startups by treating the angel funding as income goes against the flavour of entrepreneurship. As a result of this, many startups are now considering registering their company in the US or Singapore. This can potentially be a huge loss to the country. The angel tax should be abolished and the government should take notice of the fact that early stage companies have no fair method of valuation. The discussion between angels and founders is more around the cost of ownership rather than valuation. They agree on the % ownership and that results in a valuation. It’s not the other way around.
In this day and age of technology, a lot of the innovation will be seen from startups rather than larger established companies. Anything that hampers this innovation will hamper India’s future growth. The government should do everything in its power to help fuel innovation in India and ban all current policies that hamper such future growth.