Budget Proposes To Set Up Rs 10k Cr Fund Of Funds For Startups Growth

The Alternate Investment Funds (AIFs) for startups have received commitments of more than Rs91,000 crore. These are supported by the Fund of Funds set up with a government contribution of Rs 10,000 crore. Now, a new Fund of Funds, with expanded scope and a fresh contribution of another Rs 10,000 crore will be set up

Bengaluru: The Union Budget 2025 announced a slew of proposals to boost startup ecosystem in India that included creation of Rs 10,000 crore fund of funds, extension of section 80-IAC and new scheme for promoting entrepreneurships among women &people belonging to SC&ST.

“The Alternate Investment Funds (AIFs) for startups have received commitments of more than Rs 91,000 crore. These are supported by the Fund of Funds set up with a government contribution of Rs 10,000 crore. Now, a new Fund of Funds, with expanded scope and a fresh contribution of another Rs 10,000 crore will be set up,” Nirmala Sitharaman said announcing the Union Budget in Parliament on Saturday.

The budget proposes that a new scheme will be launched for 5 lakh women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs. “This will provide term loans up to Rs 2 crore during the next 5 years,” Sitharaman said.

Government has also announced that loan limit to startups will be enhanced. “For Startups, from Rs 10 crore to Rs 20 crore, with the guarantee fee being moderated to 1 per cent for loans in 27 focus sectors important for Atmanirbhar Bharat,” the budget document reads.

Importantly, the budget proposes to increase the provisions of 80-IAC for startups by another five years. Section 80-IAC, introduced in April 2017, allows eligible startups to claim 100 per cent tax deductions on profits for any three consecutive years.

Last year, the government had abolished the controversial Angel Tax for startups, treating investments received by startups from external investors as income from other sources, which is now subject to a 30 per cent tax rate.

Giving a boost to startups working in the clean tech manufacturing space, the government proposes the sector to be included under the ongoing National Manufacturing Mission. “This will aim to improve domestic value addition and build our ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, very high voltage transmission equipment and grid scale batteries,” the budget document said.

To support startups in the non-tech sectors like labour-intensive textile and leather among others, central government will come up with specific policy andfacilitation measures.

As gig economy in India grows, there is a clamour for providing more social security to these temporary workers. Union Budget tries to allay these concerns with specific proposals. Under the new proposal, one crore gig workers will be getting ID cards in the coming times, which will help them get more social benefits. Under the PM Jan Arogya Yojana, 1 crore gig workers will also get healthcare benefits, for which registration will be done via the e-Shram portal, the budget document said.