Look Out, Startups: Budget '23 Announces Tax Benefits Revisions, New Funds

With regards to direct tax amendments, FM Nirmala Sitharaman made two key announcements to bring relief to startups

By Soumya Duggal

Finance Minister Nirmala Sitharaman

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The Indian startup ecosystem found many a mention in finance minister presentation during the Union Budget 2023 session.

"Entrepreneurship is vital for a country's economic development. We have taken a number of measures for startups and they have borne results," she said, noting India's ascendance to the third position among the world's top startup ecosystems in terms of countries and the second position in innovation quality among middle-income countries.

In terms of direct tax amendments to bring relief to startups, Sitharaman made two key announcements: first, the date of incorporation for income tax benefits to startups has been extended from 31.03.23 to 31.3.24; two, the benefit of the carrying forward of losses in the event of a change in the shareholding of start-ups has been extended from seven years of incorporation to ten years.

Apart from these sought-after changes, the government has taken special notice of the agricultural sector: an open-source digital public infrastructure for agriculture will be built to enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of the agritech industry and startups.

An Agriculture Accelerator Fund will also be established to encourage young entrepreneurs in rural areas to found their own agri-tech startups. "The Fund will aim at bringing innovative and affordable solutions for the challenges faced by farmers. It will also bring in modern technologies to transform agricultural practices and increase their productivity and profitability," noted Sitharaman.

The minister also revealed that the National Data Governance Policy will be brought out to unleash innovation and research by startups and academia, enabling access to anonymized data.

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