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The startup ecosystem is happy with Finance Minister Nirmala Sitharaman´s Union Budget for 2022, which has extended tax benefits by a year. The ecosystem has also praised the FM’s 15% cap on the surcharge on long-term capital gains (LTCG) tax as a reduction in the burden on startups in terms of ESOPs and other transactions too.
The Tech Panda gathered the reactions, both positive and negative, of startups to find out how the budget has fared in the eyes of the entrepreneurs.
Read more: Budget 2022 reaction: The ‘big tech push’ for digital India
The Budget has granted the most popular wish of startups for extension of tax holiday
“The Budget has granted the most popular wish of startups for extension of tax holiday. Now the Hon’ble FM has extended the startup tax holiday scheme to startups incorporated till March 31, 2023. This was also important as the last 2 years have been challenging for those who had just stepped into entrepreneurship and are struggling to keep their startup alive. Additionally, the surcharge on long-term capital gains (LTCG) tax has been capped at 15%. This will reduce the burden on startups in terms of ESOPs and other transactions too.”
This support from the government will encourage an increasing number of students and young citizens to get aboard the startup journey and in turn create more employment and create wealth
“The Indian startup ecosystem is the third largest in the world and has notched up record investment of nearly US$36 billion in privately held companies this year as demand for digitisation grew manifold amid the Covid-19 pandemic. One major factor contributing to this is the various hand-holding measures provided by the government.
“The 30% taxation on virtual digital assets along with the 1% TDS on transfer of virtual assets above a threshold is a strong endorsement by the Indian government. We are grateful for the regulatory clarity which supports our firm belief in the same being a legitimate business activity. The extension on the tax incentives for startups is a welcomed move. The government has yet again simplified regulations, which proves helpful for early stage startups. This support from the government will encourage an increasing number of students and young citizens to get aboard the startup journey and in turn create more employment and create wealth.”
We can expect a healthier credit line for budding entrepreneurs and a better penetration in tier 2 and tier 3 cities reaching innovative businesses
“Indian startup industry has earned itself acknowledgement globally with funding on an all time high, and unicorns shining on the stage. Now that the Budget has announced the establishment of an expert committee for VC/PE funding, it is clear that the government has adopted a progressive inclination towards further boosting the growth of the startup industry.
“The expert panel will analyse the industry and guide the government to accordingly scale up the funding, form favourable policies, and nurture the segment at national level. We can expect a healthier credit line for budding entrepreneurs and a better penetration in tier 2 and tier 3 cities reaching innovative businesses.”
As a made-in-India startup, the ECLGS 1 year extension is a great initiative that can aid SMEs to help sustain some semblance of normalcy and business momentum in these challenging times
“The budget announced by the government today has been an incredibly encouraging one for India’s startup ecosystem and is an encouraging indication of the future roadmap of India’s digital transformation.
“As a made-in-India startup, the ECLGS 1 year extension is a great initiative that can aid SMEs to help sustain some semblance of normalcy and business momentum in these challenging times.
“Furthermore, the launch of the 5G spectrum can be a game-changer in increasing the speed of digital transformations across different spheres, specifically for the D2C ecosystem that has y-o-y been making significant in-roads into India’s heartland, connecting more consumers to products and essentials that they otherwise would not have access to.”
It’s a shot in the arm for MSMEs
“It is encouraging to see the focus on promoting the startup ecosystem and offering a tax holiday for another year. Increased scope of CGTMSE and ECLGS which is a positive move for MSMEs, will give cash in the hands of entrepreneurs whose business is impacted owing to covid. It’s a shot in the arm for MSMEs.
This year’s Budget by Finance Minister is pragmatic, positive, and committed to the startup sector which needed a deliberate boost to further innovate and help in sustaining the economy
“This year’s Budget by Finance Minister is pragmatic, positive, and committed to the startup sector which needed a deliberate boost to further innovate and help in sustaining the economy. The extension for startups on both, the eligibility for claiming tax holiday and the capital gains exemption for investment by another year (March 2023) is a progressive continuity of last year’s budget policies powering economic growth.
“It is encouraging to see the government’s support for startups across different sectors like healthcare, gaming, drones, electric mobility and the defence sector. The budget provides a major boost to the research and development segment and defence startups by announcing the launch of defence R&D for industry, startups and academia.”
With the emphasis on Nari Shakti, it looks like a missed opportunity on supporting inclusion and diversity. With the pandemic enabling more women to be part of the work force and entrepreneurship, the lack of any support in terms of working capital, technology upgradation, incentives to companies, MSMEs and startups for addition of female workforce has not been looked into
“The Finance Minister announced extension of the tax holiday up to March 2023 and an expansion of its guarantee fund by INR 50,000 crore to INR 5 lakh crore. Millions of MSMEs impacted by the pandemic may receive additional support from ECLGS, aiding them in softening but not minimizing the impacts. The dedicated fund for agtech is a great move in the right direction as it will regulate and infuse capital into a much needed sector of the economy.
“However, with the emphasis on Nari Shakti, it looks like a missed opportunity on supporting inclusion and diversity. With the pandemic enabling more women to be part of the work force and entrepreneurship, the lack of any support in terms of working capital, technology upgradation, incentives to companies, MSMEs and startups for addition of female workforce has not been looked into.
“With the amount of energy and capital the startups have brought in, the path of integration into preferential procurement has not been spelled out either.
“Further, we are also looking forward to the interconnectivity of MSMEs platforms – Udyam, e-Shram, NCS and Aseem portals – and believe this will improve entrepreneurial opportunities and facilitate operability for MSMEs. With the immense value that the Startups ecosystem has been able to bring over the past year and the creation of 80+ unicorns, Budget 2022 could have had additional perks for startups in acceleration phase by way of incentives and support to scale in a much more scalable manner including additional support when working in a Tier 2 Tier 3 area.
“But we have immense confidence in the Indian entrepreneurs and the MSMEs, as we have seen over the past few years and even in the pandemic, are extremely resilient and would be able to showcase the strength of the grit, determination and might on the global stage.”
Overall, this year’s budget is balanced and conducive to strong business growth which we are expecting for the year 2022
“By extending tax incentives to startups by one year, the Indian government has added fuel to India’s startup ecosystem, and this will incentivise startups who are on track of profitability. Second important thing for startups that the Finance Minister has announced is a fund that will be facilitated by NABARD to finance the startups for agriculture and rural enterprises focusing on the value chain of farming and it really shows government commitment toward supporting agriculture based enterprises.
“On a personal level, I also liked the clarity on crypto tax structure, which may look burdensome for retail investors but in my view, it is an acknowledgment from the government for this sector and a transparent tax structure is better in the long haul. Overall, this year’s budget is balanced and conducive to strong business growth which we are expecting for the year 2022.”
The retail and e-commerce sectors encompass a sizable startup community, and the allocation of INR 6,000 crore in the 2022 Union budget to rate MSMEs over a five-year period is a commendable move to further encourage and cultivate this community, particularly small and medium-sized entrepreneurs
“This year’s budget is quite optimistic for the startup sector. Their contribution to economic growth has been recognised, and the tax incentive period for startups has been extended to four years from the date of incorporation.
“The retail and e-commerce sectors encompass a sizable startup community, and the allocation of INR 6,000 crore in the 2022 Union budget to rate MSMEs over a five-year period is a commendable move to further encourage and cultivate this community, particularly small and medium-sized entrepreneurs.
“Furthermore, the emphasis placed on deep tech is greatly appreciated by growth enablers such as ourselves, as our focus has been on the software application layer, which provides real solutions to a plethora of problems and business opportunities. This year’s budget includes a significant emphasis on deep technology, which will provide strategic depth to emerging businesses in times to come.”
Getting government contracts for tech startups is still very complicated and should be made easier
“The 2022 Budget saw many missed expectations for SMEs and startups. As one of the fastest growing contributors to GDP, the SaaS sector should be promoted more by the central government. Share allocation process for startups to be simplified. Low cost tech education in Tier 3 and smaller towns is a huge must, as supply of skilled tech workers is at an all time low compared to demand.
“Getting government contracts for tech startups is still very complicated and should be made easier. Labour Law reforms for tech companies would be appreciated too. The govt. needs to stand behind Indian SaaS companies to make India the no. 1 SaaS exporter in the world. Hopefully we will see some of this in next year’s budget.”
More emphasis on technologies like deeptech, agritech, EV tech, defence & digital payments is also a positive sign for tech startups
“The true Bharat has arrived. I couldn’t be more delighted to see that two major keywords made the whole backbone of #UnionBudget2022 rural India i.e. The real Bharat and startups. We’re so glad to be a part of this movement and to be present at the center to mobilize the youth from Tier 2, 3 & 4 cities for 60 lakh jobs and empower rural India. This budget has proved once again that the Modi Government is dedicated towards unleashing the power of the rural economy and focusing on Bharat. Startups and rural India is a combination that’s going to contribute massively for the US$5 trillion vision in the upcoming years.
“It is interesting to see great focus being laid on the Production-Linked Incentive (PLI) scheme’s potential to generate at least 60 lakhs new job opportunities across a wide spectrum of sectors. More emphasis on technologies like deeptech, agtech, EV tech, defence and digital payments is also a positive sign for tech startups.”
There is an overarching theme of boosting digitization and entrepreneurship via tax incentives for another year and by earmarked capital expenditure and promoting startups in sector such as defense, agriculture, drone, digital currency, data centers, animation etc.
“Budget sets the tone for taking India one step forward as the startup capital of the world. There is an overarching theme of boosting digitization and entrepreneurship via tax incentives for another year and by earmarked capital expenditure and promoting startups in sector such as defense, agriculture, drone, digital currency, data centers, animation etc. There is no doubt it will lead to an accelerated trend of global investments and growth for the Indian startups.
The plan to enable startups to manufacture drones will boost the new-age OEMs, while opening up of defence R&D to startups will enable more entrepreneurs to strengthen the defence backbone of the country
“The government has made its intention of promoting startups very clear in this budget. Enunciation of the push to the digital economy will ensure exponential growth for startups. With strong government support, I am sure the number of new startups in 2022-23 will far exceed the number in the current financial year.
“According to Economic Survey 2021-22, the government recognised over 14,000 startups during the year, taking the total number of recognised startups to 61,400. With this, India became the third-largest startup ecosystem in the world. The constant support from the government will strengthen the ecosystem further.
“The plan to enable startups to manufacture drones will boost the new-age OEMs, while opening up of defence R&D to startups will enable more entrepreneurs to strengthen the defence backbone of the country. Extension of tax benefits to startups incorporated by March 31, 2023 will also incentivise new startups.”
Government boost to MSME with credit support will enable the Fintech companies to enhance their product offering and continue building robust technology for Bharat
“Considering the challenges faced by the Indian economy in this pandemic, the Ministry of Finance has put up a fine balancing act. The Union Budget 2022 has various encouraging initiatives that will propel aspiring entrepreneurs and boost small businesses. Government boost to MSME with credit support will enable the Fintech companies to enhance their product offering and continue building robust technology for Bharat.”
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