Budget 2019 expectations: Availing loans or borrowing money for startups is always a time-consuming task. The number of formalities, bank or any financial institution perform, become hectic for borrowers. Therefore, they are quickly shifting towards 'Peer to Peer' lending. It is a unique platform that lets borrowers and lenders contact each other. P2P platforms are the online based applications or channels that allows investors to lend money to the listed borrowers at a fixed interest rate. 

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Bhavin Patel, Co-Founder & CEO, LenDenClub told Zee Business Online, "Peer to Peer' (P2P) lending is growing at rapid pace. Some tax sops to this upcoming industry will definitely help companies to flourish their business faster." 

P2P lending was started in 2014 but it got RBI's compliance in 2016. The borrowers can register or make a profile on these platforms on the basis of their income, age, credit score etc to get quick loans. However, RBI has put a restriction on the upper limit of lending at Rs 10 Lakh per lender for all P2P platforms. While a lender can only give a loan of Rs 50,000 to one borrower.

"The second expectation from the budget is the solution for 'Angel Tax'. It will help start-ups and upcoming founders to attract angel investment without tax implications." added Patel.

However, the government has eased on the exemption of Angel tax earlier this month in order to promote startups and entrepreneurship in the country. The DIPP (Department of Industrial Policy and Promotion) has made a simple tax mechanism for startups. 

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There are certain conditions, that a startup should meet prior to filing an exemption. The paid up share capital of the company, including premium should not exceed Rs 10 crore. The investor must have declared income of over Rs 50 lakh. Also, the investor should have a net worth of over Rs 2 crore. 

"The union government may also think of looking at P2P lending companies five years down the line as these companies can disburse multi-billion dollar worth Loans. To achieve that there could be a small amount of tax-free investment limit allowed under section 80c, in Budget 2019." 

If the government can make the investments done through P2P lending tax-free, more investors will join and this will be a great help especially for individual borrowers & MSMEs. To boost P2P lending sector, recently UK government have allowed P2P lenders to invest up to £20,000 a year across P2P platforms tax-free. A similar structure can be developed in India, based on our tax structure.