Union Budget 2023: FM proposes measures to strengthen startup ecosystem in India

• ByStartupStory     |    February 1, 2023

“Entrepreneurship is vital for a country’s economic development. We have taken a number of measures for start-ups and they have borne results. India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries,” said FM Sitharaman.

The following is a list of measures taken by the Finance Ministry to boost Startups ecosystem in India.

Tax Benefit

In her budget speech on Wednesday, Finance Minister Nirmala Sitharaman proposed extending the date of incorporation for income tax benefits to start-ups from 31.03.23 to 31.3.24. The FM also proposed extending the benefit of carrying forward losses to startups for a period of ten years.

The budget measure comes at a time when the startup sector is experiencing a funding winter, with investors only investing about $25 billion in Indian startups in 2022, a 40% decrease from the $42 billion raised across 1,500+ deals in 2021.

Startup India Seed Fund Scheme

The government allocated Rs 283.5 crore for the Startup India Seed Fund Scheme in Budget 2022-23, which was higher than the Revised Estimates of around Rs 100 crore in the previous budget. The Fund of Funds for Startups received a budget allocation of Rs 1,000 crore.

National Data Governance Policy 

“To unleash innovation and research by start-ups and academia, a National Data Governance Policy will be brought out. This will enable access to anonymized data,” she said on Wednesday. 

Agriculture Accelerator Fund 

Further, an Agriculture Accelerator Fund will be set-up to encourage agristartups by young entrepreneurs in rural areas. The Fund will aim at bringing innovative and affordable solutions for challenges faced by farmers, she said.

Startup India initiative

The government has taken a number of steps to encourage the growth of startups in the country. The Startup India initiative implements the Fund of Funds for Startups (FFS) scheme, the Startup India Seed Fund Scheme (SISFS), and the Credit Guarantee Scheme for Startups (CGSS) to provide capital at various stages of a startup’s business cycle.

In January 2016, the government launched the Startup India initiative with the goal of creating a strong ecosystem for nurturing innovation and encouraging private investment in the startup ecosystem.

“The budget rightly strikes a reasonable balance between addressing the key pillars of Inclusive Development, Human Capital, Innovation, and R&D, apart from laying the path for a robust economy by providing a major infrastructure boost,” said Vikram Gupta, Founder and Managing Partner, IvyCap Ventures. 

“One of the most welcoming changes is the extension of carry forward of losses for start-ups from 7 years to 10 years (beneficial for Venture Capital firms who have usually 10 years of tenure) and the period on income tax benefit to companies registered as startups by another year are positive moves,” he added.

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