Fintech Firms and Union Budget 2017

The most awaited and anticipated day in the India financial year is the Budget day. This year’s budget was slightly different compared to the previous budgets on its presentation. 1st Feb was the presentation date of this year’s budget instead of the regular March 1st. Secondly, this was Arun Jaitley’s first paperless budget, Paperless budget to make sure implementation and proper usage of the allocated funds right at beginning of next financial year. Thirdly this budget has ensured that a separate railway budget need not be held as it includes the latter also. Also, Arun Jaitley has done a proper juggling of increased transparency, lesser corruption, broader tax base and higher incentives.
Post putting the budget across to the nation the only sector that was all smiles and gave its a thumbs up to the Fintech sector. And why not? Post-Nov 8th demonetization with the government going all out to push cashless transactions and making digital payments a norm it would have surprising if the fintech sector was not given a leverage.

In tune to his quote“Digital Economy has a transformative impact in terms of greater formalization of the economy and mainstreaming of financial savings into the banking system. India is now on the cusp of a massive digital revolution.”

The finance minister has made provisions for fintech sector’s uplift on JAM (JanDhan-Adhar-Mobile) lines thereby successfully managing to keep the fintech fraternity happy.

While we look at what is in for fintech sector this budget, we shall also analyze the excluded points that support the betterment of the fintech arena.

Additions in favor of the Fintech firms :-

1. The Introduction of Referral Bonus Scheme for individuals, Cashback scheme for merchants to promote BHIM in Tier 2 and Tier 3 cities. Benefits of such schemes is to bring about direct and healthy competition between the existing payment channels while at the same time providing good alternatives to them.
2. The Launch of Aadhar pay, a merchant version of Aadhar Payment-Enabled System especially for those who do not have debit cards, mobile wallets or mobile poor. In short, this would be extremely beneficial to those housewives, people earning low salaries.
3. The budget has included changes in Grievances Handling process of digital payments, Negotiable Instrument Act to boost the confidence levels of the merchant and outlets accepting digital payments and motivate them to use digital means more. Also, this would secure them against frauds, non-payment. This is a pro digital economy move, a trump card for the finance minister in this budget.
4. Creation of Payment Regulatory Board under the RBI to make various payments interoperable and reliable.
5. For All startups incorporated after 31st March 2016, Profit-linked deduction period or the tax holiday has been increased to 3yrs out of 7yrs from 3yrs out of 5yrs.A tax holiday is a reduction or elimination of the tax on a temporary basis.
6. By March, roll out 1 million POS machines to be used at the railway stations, fuel stations, and hospitals.
7. Start-ups including fintech start-ups can avail Tax Concessions in the first 7yrs.

Fintech Priority areas excluded :

• Regulatory framework for centralising KYC to avoid frauds.
• Fintech skill development programs for to the youth to improve employment scope in this booming sector.
• Removal of establishment criterion for the start-ups to avail tax concessions.

With additions exceeding the exclusions the Fintech sector is no doubt happy but what we want to see and discuss is “How far the Union Budget 2017 will make the economy digital” which we shall in our one of our forthcoming blog.

References:

How union budget could help in going #Cashless
Based on Budget 2017: Placing Cornerstone for Future
Budget 2017: Start-ups can now avail of tax holiday in first seven years of existence
Union Budget 2017: Startups hail Arun Jaitley budget, as Fintech firms set to party !