As the government has been taking various measures to promote startups in the country, Finance Minister Nirmala Sitharaman has proposed some tax benefits to startups and pension funds in the Interim Budget 2024-25.
In her Budget Speech, the finance minister said certain tax benefits to startups and investments made by sovereign wealth or pension funds as also tax exemption on certain income of some IFSC (International Financial Services Centre) units are expiring on March 31, 2024. “To provide continuity in taxation, I propose to extend the date to March 31, 2025,” she said.
As many as 1.17 lakh startups are recognised by the government so far.
An Action Plan for Startup India was unveiled on 16th January 2016. In this, the government provides tax and non-fiscal incentives. The minister also said that the Indian economy has been put on strong and sustainable growth path.
What Experts Say
Rajesh Sivaswamy, senior partner at King Stubb & Kasiva, Advocates and Attorneys, said, “The government’s proposed tax benefits and incentives for startups are likely to have a positive impact on the development and creativity of the Indian startup ecosystem, particularly in the domains of healthcare technology, online commerce, transportation, and communication.”
He added that exemptions from Section 56 of the Income Tax Act for investments above fair market value made by sovereign wealth funds and pension funds in startups will definitely boost investor confidence in the Indian market at a time when India remains one of the few bright spots for foreign direct investment in the world.
MobiKwik Founder and CEO Bipin Preet Singh said, “The extension of tax benefits until March 2025 for startups, sovereign wealth, and pension funds signify a government committed to supporting growth and resilience. The prolonged tax benefits indicate a steady commitment to creating a conducive environment for startup development and sustainable investments.”
CEO and Co-Founder of magicpin Anshoo Sharma lauded the move saying it would provide much-needed continuity and inflows to the Indian startup ecosystem.
“We also appreciate the extension of tax benefits to startups on investments made by sovereign wealth or pension funds to 31.03.2025, this will provide much-needed continuity and inflows to the Indian startup ecosystem for another year and balance the global funding winter across the world, where India is an outstanding anomaly,” Sharma said.
Sindhu Gangadharan, Senior Vice President and MD, SAP Labs India and Vice Chairperson of Nasscom, said the extension of tax benefits for startups by one another year is a progressive and encouraging move.
“…the extension of tax exemptions for eligible startups, granting newly incorporated ventures until March 2025 to claim tax benefits for three out of their first 10 years, is a progressive and encouraging move. the government is actively promoting the creation of a robust startup ecosystem, which is crucial for driving economic development,” Gangadharan said.
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