Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 in the Lok Sabha on 01.02.2023. This is the first budget of Amrit Kaal. In her speech, the Finance Minister said that “Our vision for the Amrit Kaal includes a technology-driven and knowledge-based economy with strong public finances, and a robust financial sector.” The technology-related announcements made in the budget speech show the government’s commitment to tech enablement and tech advancement.
In the budget speech, the Finance minister also stressed the importance of entrepreneurship in the country. She said “Entrepreneurship is vital for a country’s economic development. We have taken a number of measures for start-ups and they have borne results. India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries.” The Government of India launched the Startup India Initiative in January 2016 with the goal to promote startups in the country. In a bid to boost startups, the Finance Minister has announced a variety of measures in the Union Budget. These measures are a welcome step for the startup sector which is facing a funding winter. According to India start-up deals tracker Q3 CY22 by PWC India, “Total funding touched a two-year low in the September quarter at $2.7 billion, across 205 deals.”
Let us have a look at how the Union Budget 2023-24 will impact the tech & startup sector.
Ease of Doing Business
Under the Ease of Doing Business, more than 39000 compliances have been reduced and 3400 legal provisions have been decriminalized. Deploying 100 commissioners for handling small appeals will save considerable time for startup founders.
PAN will be used as a Common Business Identifier to ease the compliance burden of the businesses. This will provide relief to businesses from repeated submission of common documents to specified government agencies. The common information and documents would be auto-fetched using PAN.
Promoting Agritech startups
The Union budget has proposed setting up an Agriculture Accelerator Fund. This fund would be set up to encourage innovation and bring affordable solutions to the challenges faced by farmers. With this fund, young agri-tech entrepreneurs can focus on developing new-age technologies and data-led farming methods to improve farming productivity and efficiency.
There will also be the development of digital public infrastructure for agriculture as an open source, open standard, and interoperable public good that will support the growth of agri-tech startups.
National Data Governance Policy
National Data Governance Policy has been announced as a part of the Union Budget. Under this policy startups and research centers will be able to access anonymized data. This anonymized data will include the non-personal datasets that are with the government. The private sector will also be encouraged to share non-personal datasets.
A platform will be designed where Indian academia and startups can submit requests and obtain non-personal datasets. This anonymized data will accelerate innovation by helping startups develop new products, identify opportunities and improve service delivery. For eg agri-startups can leverage datasets related to climatic data to develop solutions.
The Finance Minister announced the setting up of 3 Centers of Excellence for Artificial Intelligence to realize the vision of ‘Make AI in India and Make AI work for India’ These centers will be set up in existing educational institutions and will partner with the leading industry experts to develop cutting edge applications, carry out interdisciplinary research, and design solutions that can be scaled in the areas of agriculture, health, and sustainable cities.
To tap the potential of 5G, the government plans to set up 100 labs in engineering colleges across the nation to develop applications using 5G services. This will give rise to new business and employment opportunities. The focus of these labs would be to develop applications in areas of smart classrooms, precision farming, intelligent transport systems, and health care applications.
The scope of documents in DigiLocker will be expanded. And fintech companies will be able to use the documents available in DigiLocker leading to more fintech innovation. An EntityDigiLocker will be available for MSMEs, large businesses, and charitable trusts. These entities will be able to store and share documents with various authorities, regulators, banks, and other business entities securely.
To boost green mobility, the government has extended the customs duty exemption on the import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles. This reduction in import duty will lower the battery cost and boost domestic manufacturing of EVs. This will also make EVs more affordable and increase their demand.
To boost electronics manufacturing in the country, the budget proposed reducing custom duties on certain components and parts of mobile phones and TVs. The basic customs duty of 2.75% on the import of the camera lens has been removed. Similarly, the basic customs duty on parts of open cells of TV panels has been reduced from 5% to 2.5%. This will push increased domestic manufacturing and will allow Indian companies to compete globally.
In addition to these, other parameters on income tax incentives and carry forward of losses will also lead to favorable outcomes:
Extension of the date of incorporation for income tax benefits
Startups registered under the Department of Promotion of Industry & Internal Trade (DPIIT) and having a turnover not exceeding INR 100 crore are eligible for certain tax benefits. Earlier the startups incorporated between April 1, 2016, to March 31, 2023, were eligible for the tax benefit scheme for the startups. These benefits have now been extended to startups incorporated up till March 31, 2024. Extending the incorporation benefits by one year will make the startup sector more attractive for entrepreneurs as well as investors.
Carry-forward of losses
The Union budget has also proposed the carry-forward of losses on change of shareholding of startups be extended from 7 years to 10 years. This will allow startups to use their past losses for up to 10 years. This gives the startups an additional 3 years to protect the lapsing of losses. As startups take time to reach profitability, increasing the number of years that losses can be carried forward is a positive step.
These incentives and policies show the resolve of the government to strengthen the technology and startup ecosystem in India. Stay tuned to this space to learn how each of these will comprehensively impact the tech and startup space, leading to favorable outcomes for the Indian economy.
Click here to read the complete budget speech.