Center gives big relief to startup ecosystem, announces extension of tax benefits till March 2025

New Delhi, 02 February. In a relief to the startup ecosystem, the Central government on Thursday announced extension of tax benefits for investments made by startups and sovereign wealth and pension funds till March 2025. Tax exemption on certain tax benefits for investments made by startups and government wealth or pension funds is ending on March 31 this year. Apart from this, tax benefits on certain income of some International Financial Services Center (IFSC) units have also been extended for one year.

"To provide continuity, I propose to extend the date to March 31, 2025," Finance Minister Nirmala Sitharaman said while presenting the interim budget on Thursday. She said, as far as tax proposals are concerned, in keeping with tradition, I am not proposing to make any changes related to taxation, and maintain the same tax rates for direct taxes and indirect taxes, including import duties. I propose.

Anil Joshi, managing partner, Unicorn India Ventures, said the extension of tax exemption for startups is a good sign and the provision of Rs 1 lakh crore for the sunrise segment at nominal or zero interest rates will definitely help small businesses. No changes were expected in direct and indirect taxes, though we may see new rates in the full budget proposed in July 2024, he said.

Rishabh Goyal, co-founder and CEO of Credgenix, said the government has extended the tax benefits for an additional year to maintain the growth momentum of existing startups. According to the Department for Promotion of Industry and Internal Trade (DPIIT), income tax exemption has been granted to 2,975 government-recognized startups so far.

The government provides income tax exemption under the 'Startup India' program. The government had notified new angel tax rules in September last year that include a mechanism for valuing shares issued by unlisted startups to investors. Startups registered with DPIIT were exempted from the new norms. The government highlighted that the relaxation will benefit over 80,000 startups.