Top startup leaders in India are happy with the new plans from the government in the Union Budget 2025. These steps seek to help new businesses grow, spark new ideas in various fields, and raise spending in both towns and rural areas.
Prashanth Prakash from Accel said that India’s startup scene is changing, and the government’s aim to help local businesses reach global levels is a good move. He pointed out that focusing on growing ideas (IP) and new tech like artificial intelligence (AI) is key.
Government fund to help deeptech startups
The plan to create a special Fund of Funds (FoF) for deeptech startups got praise from Prakash. He noted that deeptech needs long-term funds since it takes time to see returns. With help from the government, private backers may join in and add funds to key fields like chips, quantum tech, precision work, and space tech.
Prakash said the FoF should start with at least Rs 10,000 crore, like the Fund of Funds for Startups that the Small Industries Development Bank of India (Sidbi) set up in 2016. He also mentioned that the new 10,000 fellowships from the PM Research Fellowship Scheme for IIT and IISc researchers would help boost India’s innovation scene.
Boosting local funds for startups
Kunal Bahl, co-founder of Titan Capital and Snapdeal, liked the added Rs 10,000 crore for Sidbi’s Fund of Funds. He noted that most startup money in India still comes from foreign sources. More local money will build stability and lessen the need to depend on global markets.
Tax cuts to boost spending
The tax cuts in the Budget, which leave more cash for the middle class, are set to raise consumer buying. Bahl pointed out that areas like health care, education, and lifestyle goods would gain from this extra money. He stressed that the new tax levels hit young workers and first-time job seekers, leading to more spending in the economy.
Supporting alternative investment funds (AIFS)
The government also looked into Alternative Investment Funds (AIFs) issues by stating that income from Category I and II AIFs will be taxed as capital gains at 12.5%. Siddarth Pai from 3one4 Capital liked this news, saying it gives needed clarity and makes AIFs equal to foreign investors. He thinks this choice will lead to more money being made in India.
Missed chances in Budget 2025
Even with these good changes, startup leaders felt that the Budget missed some key points. Bahl was let down by no changes in Employee Stock Option Plan (ESOP) tax rules, which he said are very hard on workers.
Kapoor shared the same thoughts, saying that ESOP tax rules in India are not fair, as workers must pay high taxes when using their stock options. He called on the government to rethink tax rules to help workers who use ESOPs.
Need for changes in startup certification
Another big worry was the slow work of the Inter-Ministerial Board (IMB), which certifies startups for tax breaks. Pai noted that only about 3,000 out of 1.5 lakh DPIIT-registered startups have won IMB certification. He suggested either getting rid of the IMB or fixing the process to let funding from SEBI-registered or IFSC-regulated groups count as proof of new ideas.
Conclusion
In all, the Union Budget 2025 has put forth many promising plans to back India’s startup scene, especially in deeptech and funding. Still, leaders think more ESOP taxes and startup certification changes would improve the setup for new businesses.
