As is the convention, the interim budget did not have much to offer in terms of tax regime, however, the government’s sharp focus on deep tech, research and innovation, skilling, reskilling and upskilling for youth and sustainability managed to attract some eyeballs.
Despite all the hype, the startup sector in India has been facing a downturn in funding due to various challenges with investors becoming more cautious in the post-pandemic era. Recent data by PitchBook revealed a concerning 30% decline in investments in Indian startups during the last quarter of 2023, and a considerable 20% reduction in startup investments throughout 2023 compared to the previous year. However, this did not stop startup owners and leaders in the space to underscore a growth potential, who looked at the Budget 2024 as a means to reignite the startup ecosystem in the country.
The Interim Budget for 2024 has been able to address only a few of the key priorities highlighted by stakeholders which included simplified regulations and compliance norms, Ease of Doing Business and tax breaks and incentives to bolster funding and foster a conducive investment environment.
“Directionally, it is clear that the government recognises the need to support innovation and startups, but much remains to be done on ground,” said Mahankali Srinivas Rao, CEO of T-Hub, reacting to the Interim Budget presented by Union Finance Minister Nirmala Sitharaman on Thursday.
The decision to retract outstanding direct tax demands is a welcome relief, aligning with the broader vision of facilitating ease of doing business, Mr. Rao added.
According to him, Spacetech, healthcare, drones, web3 and enterprise tech are some of the key areas for startups in Telangana, which will be benefitted by focus on larger technology ecosystem.
In what was her sixth consecutive budget, Ms. Sitharaman addressed the expiration of tax benefits for startups and investments by sovereign wealth and pension funds, along with the tax exemption on specific income of some International Financial Services Centre (IFSC) units.
Tax benefits for startups
“Extending tax benefits for startups and prolonging incentives for investments by sovereign wealth and pension funds until March 2025 would provide continuity and stability, encouraging long-term commitments. This fosters a favourable environment for startups, attracting sustained financial support,” said Gaurav Sahay, Practice Head - Technology & General Corporate, Fox Mandal & Associates.
“For the tech savvy youth of India, this will be a golden era,” she said, while announcing a corpus of ₹1 lakh crore for long term low or zero interest loans for innovation and research in sunrise domains.
However, it is yet to be seen how this is implemented on ground, said Krishna Priya, founder of Hyderabad-based tech startup Starbuzz.ai.
“This will not only help the government start addressing the Make in India initiative through indigenous technologies in defence but also unlock these technologies to other civilian uses. Deeptech focused funds like ours will definitely benefit from enabling initiatives like this,” Mayuresh Raut, co-founder and managing partner at an early stage venture capital firm Seafund, said.
Big push for sustainability
Another area that remained a focus for the government in the pre-election budget is sustainable energy. “Policy proposals from today’s budget reinforces the government’s commitment to its ambitious target of being ‘net zero’ by 2070,” said Raju Kumar, Energy Tax Leader, EY India.
The budgetary outlay for e-buses procurement under the PM e-bus Sewa Scheme has been increased to ₹13 billion from about ₹200 million last year.
Urban planning experts told The Hindu that Warangal and Nizamabad were eligible for this scheme and added that an increased allocation of funds to these cities to purchase more electric buses was a welcome move creating sustainable public transit.
“This will increase opportunities for a large number of small vendors for manufacturing, installation and maintenance of EV charging networks,” said Maulik Manakiwala, partner, Indirect Tax, BDO India.
Solar scheme
“The solar rooftop scheme will be a big boost to not only meet our goals for clean energy, but also set up India to start addressing EV charging infrastructure,” Mr Raut said. This will also create many more jobs for installation, manufacturing and maintenance of solar infrastructure and a secondary effect will be opportunities available for startups to build on this, he added.
“CBG (Compressed Biogas) units may also benefit from policy proposals such as financial assistance for aggregation in procurement of biomass and mandatory phased blending of CBG in CNG for transport and PNG for domestic purposes,” Kumar said.
