Budget 2022: Sitharaman woos startups with sops aplenty

From the extension of tax incentives to the introduction of a cap on the surcharge on long-term capital gains on unlisted assets, it was all wins for the startup sector in India’s first post-vaccination Budget.

“Eligible startups established before 31-3-2022 had been provided with a tax incentive for three consecutive years out of ten years from incorporation. In view of the Covid-19 pandemic, I propose to extend the period of incorporation of the eligible start-up by one more year,” Finance Minister Nirmala Sitharaman said on Tuesday.

Further, the surcharge on long-term capital gains on unlisted assets, which was erstwhile graded as high as up to 37%, will now be capped to a maximum of 15%.

The startup ecosystem that saw as many as 44 companies enter the unicorn list with record-level funding flowing across various domains will also get an expert committee to examine and suggest appropriate measures.

The government also provided incentives for startups in sectors ranging from agriculture to defence.

The agriculture-based startup community welcomed the slew of announcements that looked to encourage entrepreneurs in the sector.

Union Budget 2022-23 | Key takeaways for start-ups

“Startups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS),” the Minister said in her speech.

The government also proposed to start a fund with blended capital, which will be facilitated through NABARD, to finance agriculture and other rural startups.

The activities for these startups will include support for Farmer Producer Organisations (FPO), machinery for farmers on a rental basis at the farm level, and technology including IT-based support.

“Putting climate action as one of the focus areas of the budget is a mega move from the government. The AgTech sector plays an important role in educating farmers on sustainable modes of agriculture, scaling the operations, and reducing the carbon footprint,” said Dhruv Sawhney, Business Head and COO, nurture.farm.

The government also announced the issue of Sovereign Green Bonds for mobilising resources for green infrastructure. FM Sitharaman said that the funds collected through these bonds will be deployed in public sector projects that help reduce the carbon intensity of the economy.

Sawhney applauded the launch of green bonds. 

“It will help to bring down the cost of capital for green projects by attracting new investors.”

The Minister also announced the earmark of 25% of the defence budget for research and development, startups and academia.

The automotive component manufacturing industry that has been facing the issue of unavailability of raw materials ever since the pandemic feels that the launch of R&D in the defence sector will help alleviate the issue. 

The “opening of the Defence R&D private sector will also create yet another opportunity for the auto component sector,” Sunjay J Kapur, President ACMA said.

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