Budget 2025: Major Boost for Startups, ₹10K Cr Fund and Tax Relief

February 1, 2025: In the Union Budget 2025, Finance Minister Nirmala Sitharaman has delivered a comprehensive package aimed at further fostering India’s burgeoning startup ecosystem. As the country continues to witness a rapid rise in entrepreneurial activity, the government’s new initiatives serve as a catalyst to push startups to the next level, ensuring they are equipped with the financial resources and policy support they need to thrive.

One of the most notable announcements for the startup sector is the extension of the 100% tax deduction on profits under Section 80-IAC of the Income Tax Act. Originally introduced in 2017, this provision allowed eligible startups to claim a 100% tax deduction on profits for three consecutive years. The Finance Minister’s decision to extend this benefit for an additional five years will significantly ease the tax burden for startups, particularly those in the early stages, allowing them to reinvest profits into growth and innovation.

A Robust Fund of Funds for Startups

The government is also setting up a new Fund of Funds for Startups, with a fresh contribution of ₹10,000 crore, building upon the initial ₹10,000 crore allocated under the previous budget. The Fund of Funds initiative, aimed at improving access to capital for emerging businesses, will enhance the availability of financial support, enabling startups to scale their operations without the looming threat of funding constraints.

This announcement follows a trend of ongoing government support to ensure that startups have the necessary financial backing. The total value of alternative investment funds (AIFs) has already exceeded ₹91,000 crore, a testament to the increasing commitment of investors and stakeholders to the startup ecosystem.

Moreover, the credit guarantee cover will be enhanced, ensuring that startups find it easier to access loans and credit facilities to expand their operations. The goal is to reduce the friction that often hinders new businesses from securing the capital they need, which has been a longstanding challenge.

Supporting Women and Marginalized Entrepreneurs

The government’s commitment to fostering inclusivity is evident in the announcement of a new scheme designed specifically to benefit five lakh women and Scheduled Caste/Scheduled Tribe first-time entrepreneurs. This is a significant move toward ensuring that all segments of society have the opportunity to tap into the entrepreneurial ecosystem. Providing these entrepreneurs with both financial and technical support will not only help diversify India’s startup landscape but will also empower traditionally underrepresented groups to create lasting change in their communities.

A Continued Commitment to Startup Success

The government’s efforts to nurture a vibrant startup culture were further strengthened last year with the abolition of the controversial Angel Tax. This tax had previously been a major hurdle for startups, as it taxed investments made by external investors at a 30% rate. By removing this tax, the government has cleared the path for easier access to external funding, making it more attractive for investors to back promising startups in India.

As of today, more than 1.6 lakh startups are officially registered under the Startup India program, with 3,604 startups having already been granted tax exemptions. This demonstrates the significant progress India has made in creating an enabling environment for entrepreneurs. The government’s commitment to supporting startups through targeted policy measures is now reflected in the ongoing policy announcements and a clear roadmap for future growth.

Empowering Entrepreneurs for a Self-Reliant India

The comprehensive support provided in the Budget 2025 will not only empower existing startups but will also encourage new entrepreneurs to enter the market. With extended tax breaks, expanded funding opportunities, and a special focus on inclusivity, this budget will have a lasting impact on India’s startup ecosystem.

The government’s focus on women entrepreneurs and entrepreneurs from marginalized communities is a step toward reducing disparities and ensuring that the benefits of the startup boom are felt by all sections of society. By providing the tools and capital needed to succeed, the government is shaping a more inclusive and diverse startup landscape.

The Road Ahead for Startups in India

Looking forward, these measures will help India solidify its position as a global leader in innovation and entrepreneurship. With these new provisions, including increased funding, improved access to credit, and tax relief, Indian startups are now in a stronger position to compete on the global stage. Whether it’s expanding operations, increasing research and development, or innovating new products and services, the Union Budget 2025 lays a solid foundation for continued entrepreneurial success.

The government’s focus on supporting startups, fostering inclusivity, and driving innovation reflects a holistic approach to economic growth, ensuring that India’s entrepreneurial ecosystem not only survives but thrives in the years to come.

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