FM’s one-person co vaccine leaves startups in two minds

NEW DELHI: The proposal to incentivise setting up a One Person Company (

OPC

) might not lead to any significant boost for

startups

, though it may help microentrepreneurs formalise their business at a very early stage.


The Budget also extended the tax holiday for eligible startups by another year, till March 31, 2022, along with a similar extension for startups for

capital

gains exemptions.

While allowing OPCs to “grow without any restrictions on paid-up capital and turnover, allowing their conversion into any other type of company at any time”, FM reduced the residency limit for an Indian citizen to set up an OPC to 120 days, from 182 days, and allowed NRIs to set up OPCs in India.

“The ability of OPCs to raise external capital, be it angel funding or any other, is severely limited. OPCs can’t even issue staff shares. This announcement is good for people who are running mom-and-pop shops, since they can now have a corporate structure and avail of lower tax rate,” said Siddarth Pai, founding partner at venture capital firm 3one4 Capital.

Nithin Kamath, co-founder and CEO of

Zerodha

, echoed Pai, saying, “I don’t think it will make any material impact on the startup ecosystem like Bengaluru’s. Maybe it will help micro or smallsized entrepreneurs, like someone setting up a bakery.”

But Ankur Bansal, co-founder of BlackSoil, a venture debt platform, said the biggest advantage of an OPC is that its identity is distinct from that of its owner.