In the Union Budget 2022-23 Finance Minister Nirmala Sitharaman proposed to cap the surcharge on long-term capital gains (LTCG) from shares of unlisted companies at 15 percent in a move likely to boost investments in startups.
“The long-term capital gains on listed equity shares, units etc are liable to maximum surcharge of 15 per cent, while the other long-term capital gains are subjected to a graded surcharge which goes up to 37 per cent. I propose to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 per cent,” she said in her Budget speech.
“The change announced today will help startup founders, employees and domestic VCs selling unlisted shares, which in turn will set off a virtuous cycle of more investments in the startup ecosystem,” said Siddarth Pai, managing partner of venture capital firm 3one4 Capital.
“For ESOP holders, this change is a step forward to the long-awaited ask of tax parity between listed and unlisted securities. This will boost ESOPs as a means of attracting and retaining talent and increase rupee capital participation in the Indian startup ecosystem,” Pai added.
“Eligible startups established before 31.3.2022 had been provided a tax incentive for three consecutive years out of ten years from incorporation. In view of the Covid pandemic, I propose to extend the period of incorporation of the eligible startup by one more year, that is, up to 31.03.2023 for providing such tax incentive,” said the Finance Minister in her Budget speech.
