Startups need clarity on directly listing abroad, ESOP taxation

New Delhi, Feb 1 As the government aimed to help Indian startups continue their glory run with tax incentives, several startups said that certain issues like allowing them to directly list abroad and ESOP taxation to benefit employees should have been addressed in the Union Budget 2022-23, which was presented in the Parliament by Union Finance Minister Nirmala Sitharaman on Tuesday.

According to them, the Budget augurs well for the angel investor community and founders who seek liquidity in the long term.

Capping the surcharge applicable on top of Long Term Capital Gain (LTCG) typically seen during startup liquidity events to 15 per cent should help founders and angel investors save 4 per cent on overall return, said Ankit Prasad, Founder and CEO, Bobble.AI.

"Though I must say that the LTCG is still very high for Indian resident founders, which has been a major reason for successful Indian founders to become non-residents (typically moving to Singapore or the UK) after reaching certain valuation levels," he said.

The startups and foreign investors have been requesting the government to allow them to directly list abroad.

Last year, top startups and venture capital firms had written to Prime Minister Narendra Modi to allow direct overseas listing for Indian companies.

The government is still examining the request to allow direct overseas listing for Indian startups.

The current rules allow an Indian firm to list abroad only after it has been listed in the country via depository receipts.

To further bolster the startup and fintech ecosystem, the government has also announced to establish thematic funds to promote and encourage the sunrise sectors in the country.

"The introduction of thematic funds, where the share of the government would be limited to 20 per cent, the government has established a constant flow of capital for the sector, enabling it to innovate and grow, while at the same time generating wealth for the investors," said Harshil Mathur, CEO and Co-founder, Razorpay.

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