Union Budget 2025 | After a lag, young startups get a fillip with domestic venture capital funding

Bengaluru: After yet another lag in India’s startup funding in the last quarter of 2024, Finance Minister Nirmala Sitharaman tabled the Union Budget on Saturday with new funding initiatives.

Launching a new “Fund of Funds”, Sitharaman proposed new funding under Alternate Investment Funds (AIFs) for startups with another Rs 10,000 crore.

AIFs for start-ups have secured commitments of over Rs 91,000 crore, she said.

Previously, in 2016, the Union Cabinet had approved a Fund of Funds for Startups (FFS) with an outlay of Rs 10,000 crore as part of its Startup India Action Plan, boosting domestic venture capital.

A fund of funds model works as a mutual fund that invests in other funds (like mutual funds or private equity funds). Currently, AIFs like Chiratae Ventures, India Quotient, and JM Financial are supported by FFS.

Another big boost to startup funding was doubling the limit for credit guarantee cover to Rs 20 crore, with the guarantee fee being moderated to 1 per cent for loans in 27 focus sectors. This improves startups’ access to formal credit and reduces risks for lenders.

With a focus on emerging technologies, the FM revealed a Rs 500 crore outlay for a Centre of Excellence in Artificial Intelligence for education. She also announced that a deep tech Fund of Funds would be explored.

An additional scheme to benefit 5 lakh women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs was announced to provide term loans up to Rs 2 crore during the next five years.

The scheme will incorporate lessons from the earlier Stand-Up India scheme.

“Online capacity building for entrepreneurship and managerial skills will also be organised,” added the Finance Minister Nirmala Sitharaman.

Eligible startups incorporated by April 1, 2030, can avail tax benefits under the Income Tax Act, announced Sitharaman. This extends the deadline by five years.

These initiatives bring cheer to the ecosystem with more avenues to access capital, following the last Budget's slash of Angel Tax.

Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.