Budget 2022-23: FM extends tax incentive for start-ups by one year

Bengaluru, February 1

In her budget 2022-23 address, Finance Minister Nirmala Sitharaman proposed a one year extension for the tax incentives provided to start-ups. 

“Start-ups have emerged as drivers of growth for our economy. Over the past few years, the country has seen a manifold increase in successful start-ups. Eligible start-ups established before March 31, 2022 had been provided a tax incentive for three consecutive years out of ten years from incorporation. In view of the Covid pandemic, I propose to extend the period of incorporation of the eligible start-up by one more year, that is, up to March 31, 2023 for providing such tax incentive,” the Finance Minister said. 

Further, the minister has also capped the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent. She noted that this step will give a boost to the start-up community and re-affirms the government’s commitment to Atmanirbhar Bharat.

This year’s budget also touched upon the importance of start-ups’ contribution in various sectors such as agritech, and defence among others. The finance minister has said that start-ups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS). 

In addition to this, a fund with blended capital, raised under the co-investment model, will be facilitated through NABARD. “This is to finance start-ups for agriculture and rural enterprise, relevant for farm produce value chain. The activities for these start-ups will include, inter alia, support for FPOs, machinery for farmers on rental basis at farm level, and technology including IT-based support,” said Sitharaman.

Defence R&D will also be opened up for industry, start-ups and academia with 25 per cent of defence R&D budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through the SPV (special purpose vehicle) model. 

Further, talking about start-up investments, the Finance Minister said that venture capital and private equity invested more than ₹5.5 lakh crore last year facilitating one of the largest start-up and growth ecosystem. She acknowledged that scaling up this investment requires a holistic examination of regulatory and other frictions and so, an expert committee will be set up to examine and suggest appropriate measures.

The Economic Survey noted that India had a record number of start-ups (44) reach unicorn status in 2021, and overtook the UK to emerge the No. 3 country by number of unicorns, after the US and China. As of January 14, 2022, India had 83 unicorns with a total valuation of $277.77 billion.

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