Union Budget 2023 and its impact on start-ups in India
Updated: Mar 21
The Union Budget 2023 has brought good news for India's start-up ecosystem, with announcements aimed at supporting the growth of startups in the country. However, a section of entrepreneurs expressed disappointment that more was not done to support their businesses. The Finance Minister, Nirmala Sitharaman, highlighted the importance of entrepreneurship for a country's economic development, and emphasized the government's commitment to supporting startups by introducing a range of beneficial measures. Let’s take a look at some announcements made.
Union Budgets in India typically have a significant impact on startups in the country. The budget may introduce new policies, regulations, or tax reforms that could either encourage or discourage entrepreneurship and startup growth. For instance, the budget may provide tax breaks or incentives for startups, which could reduce their financial burden and encourage more people to start their own businesses.
Moreover, the budget could also allocate funds towards the development of the startup ecosystem in the country, such as establishing incubators and accelerators or providing grants to startups for research and development.
On the other hand, the budget could also introduce policies or taxes that could make it difficult for startups to operate in the country. For example, the budget may increase taxes on certain products or services that are critical to the operation of startups, or it could introduce policies that make it difficult for startups to raise capital or hire talent.
Overall, the impact of the Union Budget 2023-24 on startups in India will depend on the specific policies and reforms introduced. However, it is likely that the budget will have a significant impact on the startup ecosystem in the country.
Extension of Income Tax Benefits for Start-ups: The Indian government has announced an extension of the date for incorporating start-ups to receive income tax benefits from March 31, 2023 to March 31, 2024. This was seen as good news for the country's start-up ecosystem. The extension is expected to provide more time for start-ups to avail these benefits and thus promote entrepreneurship and economic development in the country.
Carry-Forward of Losses on Shareholding Changes: The government has proposed to extend the carry-forward of losses on change of shareholding of start-ups from 7 years of incorporation to 10 years. This move was seen as a welcome one by Sanjeev Kumar Gupta, CEO of Karnataka Digital Economy Mission, as it would help start-ups take more time to become profitable. K.R. Sekar, Partner at Deloitte India, also noted that start-ups had been demanding easy compliance and the extension of the carry-forward period.
Unified Compliance Management System: The budget has made a proposal to ease compliance through a Unified Compliance Management system, which will help start-ups fill up data in a more user-friendly format. Ankur Maheshwari, Group Chief Financial Officer of Freo, said that this focus on reducing compliance burden will help boost the start-up economy and set the stage for the next level of growth.
Funding Support: In the Budget 2022-23, the government had allocated Rs 283.5 crore for the Startup India Seed Fund Scheme, which was higher than the Revised Estimates of about Rs 100 crore in the previous budget. The budgetary allocations for the Fund of Funds for Startups stood at Rs 1,000 crore.
Funds for Startups (FFS) scheme, Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS) are implemented as part of the Startup India initiative to offer funding at different phases of a startup's business cycle.
Agriculture Accelerator Fund: An Agriculture Accelerator Fund will be set up to encourage Agri-startups by young entrepreneurs in rural areas. This move is aimed at promoting innovation and research in the agriculture sector.
National Data Governance Policy:
A National Data Governance Policy will be introduced to unleash innovation and research by startups and academia. This policy will enable access to anonymized data and encourage innovation in the sector.
Mixed Reactions from Start-up Community
While some members of the start-up community welcomed the government's efforts to support start-ups, others expressed disappointment at the lack of more visible steps to reignite the start-up culture and ease of doing business in the country. Derrick Sebastian, founder director and CEO of Simelabs, was glad about the tax holiday extension but said he was expecting the government to exempt Minimum Alternate Tax (MAT) and introduce a simple tax system. Anuj Khurana, CEO and co-founder of Anaptyss, also echoed similar sentiments and said that the budget brought in a feel-good factor, but could have done more to support start-ups.
In conclusion, the Union Budget 2023-24 has brought some cheer to the country's start-up ecosystem, but there is still room for more measures to promote entrepreneurship and ease of doing business in India. As the country strives to become a global leader in start-up ecosystems, the implementation of these measures will play a crucial role in helping startups grow and succeed.
Written by Anusha Das for Vyapaar Pundit