Union Budget 2023 | How startups reacted to the Budget

Union Finance Minister Nirmala Sitharaman is going to present the last full budget of the second term of the Narendra Modi government in Parliament on February 1. Here's what experts, industry insiders are expecting from this year's Budget. Stay tuned to DH for the latest updates!

The Union Budget 2023 is forward-thinking and has a positive tone. The budget is pro-MSMEs and startups, especially knowing India is home to the third largest startup companies in the world: Sekar Udayamurthy, CEO and Co-founder, Jidoka Technologies

"The Union Budget 2023 is forward-thinking and has a positive tone. The budget is pro-MSMEs and startups, especially knowing India is home to the third largest startup companies in the world. It certainly provides further growth opportunities to these organizations, especially in the technology sector. The relief provided to the MSMEs and including them as part of the unified Skill India Digital Platform is encouraging.

The introduction of Entity DigiLocker providing online security to all organizations is a much-needed one, in these times of growing cybercrimes.
The National Data Governance Policy will benefit start-ups in a big way."

This will encourage the thriving startup ecosystem and also attract global players to invest in India: Ashutosh Desai, Associate Vice President, Concept Integrated

"The Finance Minister also announced a slew of measures for ease of doing business such as the reduction of more than 39,000 compliances and decriminalisation of more than 3,000 legal provisions. Also, PAN will be used as a common identifier for all Digital Systems of specified government agencies. The Union government will set up a DigiLocker digital document storage capability to enable the storage of documents digitally and ease the process of digital application of credit for MSMEs. This will encourage the thriving startup ecosystem and also attract global players to invest in India. The development of 50 new airports and helipads will aid seamless connectivity."

The Union Budget '23 will pave the way for new opportunities across diverse sectors: Anup Patil, Co-founder and CEO, Intangles

"India is emerging as a global startup hub, witnessing steady growth in emerging tech and digital companies. The Union Budget '23 will pave the way for new opportunities across diverse sectors. With a special focus on data and AI, concrete efforts can be made to grow the ecosystem and materialise the vision of a $5 trillion economy by leveraging the power of technology. The initiatives taken by the government over the last few years have been pivotal in shaping the automotive sector, with tax reforms being directed towards green energy and mobility."

The union budget hasn’t attempted to fix the anomalies in startup regulations: Vishwas Patel, Executive Director, Infibeam Avenues Ltd & Chairman, Payment Council of India

"the government should have made other sources of funds available locally for startups by incentivizing the insurance companies, EPFO, private pension funds and other domestic institutions to participate in investing in the burgeoning startup ecosystem. This would have met the capital requirements for the startups.
The union budget hasn’t attempted to fix the anomalies in startup regulations, conditions around the angel tax issue that requires to be simplified and tax holidays or lower tax structure for startups has been left unresolved. Even the strong demand from the startup community for taxing Employee ESOPs only at the time of selling the share has not been fulfilled. The government should consider expanding the scope of this relief to include more startups, irrespective of whether the startup is registered under the Department for Promotion of Industry and Internal Trade (DPIIT) or not. All startups should be treated equitably.
The increase from 7 years to 10 years for carrying forward losses by startups is a commendable step taken by Finance Minister Nirmala Sitharaman, along with tax reliefs given to the middle class and service class public by reducing the tax liability."

Budget recorded a strong focus on the development of MSMEs and startups.. the measures, coupled with the National National Data Governance Policy, will boost digital innovation: Gautam Nimmagadda, Founder & CEO, Quixy

"The union budget is growth focused, a welcome announcement that liberally provides impetus to digital India. The government’s strides in advancing public and private digital services are a testimony to the rising global profile of the Indian Technology industry. The Indian government has recorded a phenomenal improvement in the Taxpayers Services owing to their digital adoption, where the average processing period has been reduced drastically in the past few years.

Furthermore, the 3 CoE’s for AI and the 100 labs for developing applications using 5G services will drive digitization and reignite employment potential in the tech ecosystem. Such measures demonstrate the multiplier impact of tech on India's strides onwards. Yet another stimulus was provided for E-Courts, a novel initiative undertaken to transform the Indian Judiciary by ICT enablement of Courts. A digitally driven government will expedite a digitally driven India.

Furthermore, the budget recorded a strong focus on the development of MSMEs and startups, with the extension of the carry forward of losses on change of shareholding of startups to 10 years of incorporation. This measure, coupled with the establishment of the National Data Governance Policy, will boost digital innovation empowered by ease of doing business."

Budget was beneficial for startups as it introduced tax benefits on incorporation which is extended by a year and carry forward of losses to set off against future profits will now be allowed for 10 yrs: Prem Kumar Vislawath, Co-founder, Marut Drones

"The Union Budget 2023 has laid focus on infrastructure spending, meeting its climate change commitments, agricultural, technology, farmers and startups, amongst others. With the announcement of “Agricultural Accelerator Fund” and focus on bringing technology to agriculture it will promote agricultural startups in the country and benefit the drone industry that is working on making agriculture more sustainable, cost effective, efficient and increase the yield for the farmers. We really hope this fund will be beneficial to us like the Drone Shakthi Initiative which was rolled out during budget 2022.

We are positive that it will bring in modern technology to transform age old agricultural practices and will encourage more youth to adopt farming. We think the initiative’s idea is to offer an innovative and affordable solutions to present day farmers where our Marut drone rightly fits in, and with the reduction of import duty on batteries we will be benefited to manufacture more affordable drones to empower the farmers, We are extremely happy with the introduction of PM Vikas Yojana 4.0 which encourages new age courses such as drone training, with this initiative the government has aligned to Marut drones vision of making youth empowered towards adopting technological and IOT based solutions for age old problems, another highlight of the budget was to increase agriculture credit target to 20 lakh crores, this will encourage more people to adopt for Farming as it reduces the financial burden.

We are happy that the budget also focused on incentives for MSME’s by introducing benefit of Presumptive taxation for the companies with the turnover of 2 crore. And launching revamped credit guarantee scheme through infusion of 9000 crore form April 1st. we also believe that the budget was very beneficial for startups as it introduced tax benefits on their incorporation which is extended by year and the carry forward of losses to set off against future profits will now be allowed for 10 years instead of 7 years previously”.

The extension of startup tax incentives until 2024 is a positive step that will foster innovation and growth in the startup sector: Ananth Narayanan, Founder, Mensa Brands

“The 2023 Union Budget is a comprehensive and progressive plan aimed at boosting India's economy, with a focus on agriculture, startups, MSMEs, fintech, and digital infrastructure. The extension of startup tax incentives until 2024 is a positive step that will foster innovation and growth in the startup sector. The government's increased capital expenditure, with a 33% increase, highlights their commitment to improving infrastructure, particularly in transportation and connectivity. Additionally, the budget acknowledges the significance of startups by offering tax benefits and supports the middle class with tax reductions. Despite these initiatives, the government has managed to maintain fiscal discipline and keep the fiscal deficit under control."

There are several NGOs and startups that would benefit greatly if the government would sanction some budget for the same or launch initiatives that serve the purpose: Vijender Reddy Muthyala, Co-founder and CEO of DrinkPrime

"While we applaud the government for making drinking water more accessible through initiatives like the Jal Jeevan Mission-Har Ghar Jal, we believe it is critical to make safe drinking water more affordable. Lowering or eliminating GST on water purifiers, as consumer durable, will help treat them as an essential service required by all Indians. It will encourage people to invest in their health while helping mission oriented brands like DrinkPrime provide clean, safe and healthy drinking water to everyone.

Lake rejuvenation and ground water regeneration is the need of the hour. There are several NGOs and startups that would benefit greatly if the government would sanction some budget for the same or launch initiatives that serve the purpose.

Similarly, taxation on ESOPs should occur at the final sale of shares rather than when they are offered. This makes attracting good talent difficult in an already competitive market with a severe talent shortage. If this is addressed, organisations will be able to offer additional benefits to potential or high-performing employees.

As more smart city plans flow out, we request the government to also focus on IoT technology as it is definitely the future of smart ownership."

Incentivising service providers and improving reach to the MSME segment will significantly increase the supply: Vipul Verma, Executive Vice President, Wadhwani Advantage at Wadhwani Foundation

“With multiple government schemes assisting in the growth of MSME ecosystem, there is an increasing demand for various financial and non-financial services that will help MSMEs in their growth journey. Incentivizing these service providers and improving reach to the MSME segment will significantly increase the supply. This will help MSMEs build systems, talent, capacity, infrastructure, access to capital and other ingredients to meet the growth demand.”

The upcoming budget will be crucial in defining the way forward for the Indian economy: Nirav Choksi, CEO, Co-founder at CredAble

Union Budget 2022 was a landmark digital budget as we saw the introduction of multiple pathbreaking reforms that were invested in accelerating India’s digital revolution. The upcoming budget will be crucial in defining the way forward for the Indian economy. We’re positive that policy changes that will drive continuous growth are in order. We will need to view the budget from the larger macroeconomic perspective of fiscal discipline. That said, we are hoping to see some reforms aimed at spurring the economy such as CAPEX outlays in areas like infrastructure, education, healthcare, and agriculture.
From bringing forth multiple disruptive inventions to the market to job creation across the country, the startup ecosystem is a crucial part of the Indian economy. They are expected to contribute close to 4-5% to India’s GDP in the next three to five years. Today, we see a measured approach to funding with investors warming up to emerging sectors. With all this in the backdrop, 2023 is undoubtedly going to be an exciting year for startups in the country. We look forward to a new set of measures to further solidify India’s startup sector such as the deferment of time of tax payment on Employee Stock Option Plans (ESOPs). Additionally, the government should look at lowering the minimum alternative tax (MAT) for eligible startups to 9% from 15%. Actionable plans for the promotion of ease of doing business for startups should be introduced. To help startups save time and money, a single window for all relevant registrations such as company incorporation and GST certification should be in place. Owing to the funding winter, this year we are likely to see more consolidations in the startup space. As a result, such outbound mergers of startups should be authorised on a tax-neutral basis. Measures to have taxes imposed only on actual liquidation and not on restructuring should be introduced.
We also look forward to digitization initiatives and support measures that will boost India’s manufacturing ambitions and strengthen our position in the global economy.