The interim budget for 2024-25 has proposed to extend the tax benefit offered to startups, sovereign and pension funds, and certain investment units housed in GIFT City’s International Financial Services Centre (IFSC), by one year until March 31, 2025.
“Certain tax benefits to start-ups and investments made by sovereign wealth or pension funds as also tax exemption on certain income of some IFSC units are expiring on 31.03.2024. To provide continuity in taxation, I propose to extend the date to 31.03.2025,” Fiinance minister Nirmala Sitharaman said in her budget speech on Thursday.
Commenting on the move, Mayuresh Raut, Co-founder & Managing Partner, Seafund, said, “Extension of tax benefits for sovereign wealth funds expiring on 31st March 2024 to 31st March 2025 is a good signal from the government to indicate that there will be continuation of beneficial policies and friendly institutional investor policies.”
Announced for the first time in the Union Budget 2017, the scheme offers 100 per cent tax rebate to eligible startups on profits made for a period of three years in a total time frame of 10 years of operations. However, to be eligible, the startup’s turnover should be less than ₹100 crore in any of the previous financial years.
Under the scheme, startups are allowed to carry forward their losses incurred during the said period to the next financial year, when they can set the losses off against income.
“It is commendable to find the interim budget with its right intentions of fortifying the financial sector to meet the growing investment needs of our nation. The extension of tax-exemption for startup and sovereign wealth funds until March 2025 is a welcome move, fostering a conducive environment for entrepreneurial growth,” Karthik Reddy, Founder & Managing Partner, Blume Ventures & Chairperson, IVCA.
Alluding to the same, Bipin Preet Singh, Co-founder and CEO at MobiKwik noted that the extension of tax benefits signify a government committed to supporting growth and resilience. The prolonged tax benefits indicate a steady commitment to creating a conducive environment for startup development and sustainable investments.