Budget 2022: Tax benefits extended for 1 year to give big boost for startups, say experts

New Delhi: Finance Minister Nirmala Sitharaman revealed on Tuesday, as she presented the Union Budget for 2022-23 in Lok Sabha, that the existing tax incentives for start-ups, which provided tax redemption for three consecutive years, had been extended for one more year until March 31, 2023.

Start-ups have emerged as "drivers of growth for India's economy," according to Sitharaman, and the country has experienced a massive surge in successful start-ups in recent years.

"Eligible start-ups that were formed before 31.3.2022 received a tax incentive for three years out of ten from the date of incorporation. In light of the COVID pandemic, I recommend that the period for incorporating an eligible start-up be extended by one year, until 31.03.2023, in order to provide such a tax benefit "she declared.

Drone Shakti would be facilitated by various applications, according to the Finance Minister, and Drone-As-A-Service will be encouraged (DrAAS). "The requisite skilling courses will be initiated in select ITIs across all states."

The budget announced a few laudable incentives for startups. The time extension provided to claim tax benefits will provide a breather for start-ups and encourage more start-ups in India, said Ramesh Nair, CEO, India & Managing Director, Market Development, Asia, Colliers.

“It is evident that the government is sincerely committed to its goal of an Atma Nirbhar Bharat as the Budget has accorded due importance to the life blood of the economy- Start Ups. The move to extend the tax benefits that were offered to start ups by another year is a huge win. Moreover, the proposal to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent will come as a huge relief to start ups, many of which had been negatively impacted due the economic downturn induced by the pandemic,” said Arpan Srivastava, CMO, Luxury Aesthetics.

“The startup ecosystem in India is the third largest in the global market and the Budget 2022 has brought in some positive moves to help drive growth in the start-up sector in India. Extension of capital gains exemption for investments in start-ups by a year comes as a relief and will boost investor sentiment towards start-ups in India.The inclusion of 30% tax would help to regulate the cryptocurrency sector in India however it could also result in a decline in retail investor interest and further clarity on the same could help boost investor confidence. Bringing digital assets into the tax regime is a welcome move from the government and it is important to see how the implementation will be done. The government should also instruct other stakeholders such as financial institutions to support cryptocurrency players to operate with ease. Currently, several roadblocks from banks make it difficult for cryptocurrency players to function smoothly. The move of bringing digital records, one portal for logistics movement across the country will also boost health-tech, logistics start-up sectors. Enabling the digital interoperability in banking and payments will further boost fintech innovation and opportunities and boost penetration beyond Tier 1 cities to small towns and cities. Interoperability through post-office and scheduled banking will enable fintech adoption in smaller towns,” said Mohamad Faraz, Founding Partner, Upsparks.

Harry Sehrawat, Co-Founder, Sanfe said, “We are highly appreciative of the finance minister's decision to extend the existing tax benefits for startups by a whole year. The recognition of startups driving economic growth in the country and subsequent endeavors on the government’s part will certainly benefit business while boosting productivity through the ease of doing business 2.0 - ‘One nation, one registration.’ However, we do wish that the budget had covered more significant, long-term changes that would positively impact the wellness industry.”

Shreya Sabharwal, Founder and CEO, Squarefork and Growify Worldwide, said, "As the budget 2022-23 is here it is some or the otherway in favour of Startup and Hospitality sector. Recently came across the news that showed me that India now has more than 60k startups. So this step that has been taken by our government is appreciable. And it's a big relief for startup owners. Tax incentive for small businesses and startups increased by another year in the view of pandemic has given a sign of relief. Also, this tax incentive in way is a motivation for all the budding entrepreneurs out there. I would like to extend my thanks to the government for helping young entrepreneurs to save some extra money by reducing the taxation, and helping us to expand the business.