What the Budget 2023 has on offer for startups?

Union Finance Minister Nirmala Sitharaman, while tabling the Union Budget on Wednesday minced no word in asserting the importance of entrepreneurship for the economic development of the country. And that's not without reasons. India is now the third largest startup ecosystem globally, with 100+ unicorns and over 80,000 startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) across the country. The sector is witnessing a steady rise in SaaS-based companies, GCCs, as well as several emerging tech companies, including AI, robotics, space-tech, fintech, etc.

FM on Wednesday proposed to extend the period of incorporation for income tax benefits to eligible startups by one more year till March 31, 2024. Tax benefits were available for startups incorporated until March 2023, up till now. The finance minister shared during the budget that this will provide the benefit of carry forward losses on change of shareholding from seven years of incorporation to 10 years.

"The government has taken a number of measures for startups and they have borne results. India is now the third-largest ecosystem for startups globally and ranks second in innovation and quality among middle-income countries," Sitharaman said as she presented the Union Budget 2023-24 in the Lok Sabha.

Significantly, the FM also announced that the Centre is launching an accelerator fund to boost agritech startups. The fund will follow a cluster-based approach, the FM said at the Union Budget 2023. Additionally, the fund will focus on supporting young entrepreneurs from rural areas by equipping them with modern tools and technologies. She said that the digital public infrastructure for agriculture will be built as an open source, open standard and interoperable public good.

"This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agritech industry and startups," she said. It is pertinent to mention here that in January 2016, the present government had rolled out the Startup India initiative to build a strong ecosystem for nurturing innovation and encouraging private investments in the startup ecosystem. Since then, a series of steps have been taken to promote startups in the country.

Interestingly, in the Economic Survey 2023, the Finance Ministry revealed that there are over 1,000 agritech startups in India and more than 500 startups are working in the millet value chains, while the Indian Institute of Millets Research has incubated 250 start-ups under Rashtriya Krishi Vikas Yojana – Remunerative Approaches for Agriculture and Allied Sectors Rejuvenation (RKVYRAFTAAR). The survey also highlighted that the private equity investments in agritech space have skyrocketed over the past four years – witnessing an increase of more than 50 per cent per annum to aggregate approximately Rs 6,600 crore.

Last year the Centre had announced tax incentives and relaxations, such as capping the surcharge on long-term capital gains (LTCG) on all assets at 15 per cent and extended the period of incorporation for eligible startups by one more year for tax incentives. Startups understandably lapped it up. "As a startup we have witnessed our country's startup ecosystem reach international acclaim giving us a lot of hope. It will be important for the government to rationalize and revise taxes thereby helping us meet our daily capital needs to maintain optimum growth desired. The upcoming budget should focus on initiatives on skill development like entrepreneur education curriculums which help upcoming entrepreneurs like us and many more to develop," said Abhinav Kumar, Co-Founder and CEO Kaldi Craft Coffee Pvt Ltd.

"The 2023 Budget presented by Finance Minister Nirmala Sitharaman is a comprehensive plan aimed at preparing India's youth for the imminent disruption caused by the integration of Artificial Intelligence and the widespread adoption of 5G technology. In an ever-changing world, it is imperative that our future workforce is equipped with the skills and knowledge necessary to thrive in a digital economy. The budget proposes a range of initiatives aimed at upskilling and reskilling the youth, including investment in technical and vocational education, enhancement of digital infrastructure, and the promotion of entrepreneurship. These initiatives will not only create job opportunities but also help in fostering innovation and competitiveness in the country. The government's commitment to investing in human capital and building a skilled workforce is a vital component in ensuring the long-term prosperity and growth of India. It is a clear indication that we are taking proactive steps towards shaping a better future for our citizens and the nation as a whole," said Rohan Ganeriwala - Co-Founder Collegify.

Anuvrat Pabrai, Owner Pabrai's Ice creams, said, "We welcome the Budget 2023.The most significant proposal for us would be the extension of date of incorporation for startups by one year to 31.3.2024 to enable startups to avail of IT Tax holiday for three years. Also carry forward losses for new business would be permitted for 10 years instead of seven years. Both are very beneficial for us."