Budget 2023: What’s in it for Startups?

“Entrepreneurship is vital for a country’s economic development. We have taken several 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.” Nirmala Sitharaman quoted during the Union Budget 2023-24 speech.

The Indian government unveiled a 45 trillion rupees ($549.14 billion) spending budget for the fiscal year starting April to boost economic growth while aiming to lower the budgetary deficit.

The priorities are inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and the financial sector. The aim is to have strong public finances and a robust financial sector for the benefit of all sections of society. The highlights of some proposals concerning startups are as follows:

Sector-specific incentives:

Agriculture

Agriculture Accelerator Fund: To encourage Agri startups by young entrepreneurs in rural areas. It aims to bring innovative and affordable solutions for challenges faced by farmers, bringing in modern technologies to transform agricultural practices and increase productivity and profitability.

Tourism

Dekho Apna Desh initiative.

It was launched as an appeal by the Prime Minister to the middle class to prefer domestic tourism over international tourism. It will be taken up in mission mode, with the active participation of states, the convergence of government programs, and public-private partnerships.

Cleantech 

Expansion of the Green Credit Programme (GCP), to be notified under the Environment (Protection) Act to boost the adoption of sustainable business practices across segments, including startups. Pushing the carbon credit industry will allow investors to evaluate business models with greater certainty and confidence.

Skilling

• PM Vishwakarma KAushal Samman (PM VIKAS):  It aims to provide financial support, advanced skill training,  knowledge of modern digital techniques and efficient green technologies, brand promotion, linkage with local and global markets, digital payments, and social security to traditional artisans and craftspeople. It will help them improve the quality, scale, and reach of their products. It will also integrate them with the MSME value chain. 
• Launch of a unified Skill India Digital platform for:

1. enabling demand-based formal skilling,
2. linking with employers, including MSMEs, and
3. facilitating access to entrepreneurship schemes.

Digital Infrastructure

•  A National Data Governance Policy will be launched to access anonymized data. This will promote innovation and research by start-ups and academia.
• 3 centers of excellence for Artificial Intelligence will be set up in top educational institutions to realize the vision of “Make AI in India and Make AI work for India”. Leading industry players will partner in conducting interdisciplinary research and developing cutting-edge applications and scalable problem solutions in agriculture, health, and sustainable cities.
• 100 labs will be set up in engineering institutions for developing applications using 5G services for smart classrooms, precision farming, intelligent transport systems, and healthcare applications, which also involve a degree of AI and machine learning. 

Tax & Compliance

• The date of incorporation for income tax benefits to start-ups is extended from 31.03.23 to 31.3.24.
• If all shareholders continue to hold at least 51% shareholding in a company, the relaxation for losses incurred was applicable for 7 years from incorporation. They can now carry it for 10 years.
•  Certain start-ups are eligible for some tax benefits if incorporated before 1st April 2023. The period of incorporation of such eligible start-ups is to be extended by one year before 1st April 2024. 

• Investments by foreign angel investors will also attract the tax on share premium (which was earlier only applicable only to domestic investors). 
• A ‘Unified Filing Process’ to help startups seamlessly share information or returns with regulatory agencies.PAN will be a common identifier for all digital systems of specified government agencies, and startups do not need other identification numbers to meet their compliance requirements. 
• For the disposing of small tax litigation appeals of startups, 100 joint commissioners will be deployed.

MSMEs

•  In cases of failure by MSMEs to execute contracts during the Covid period, 95 percent of the forfeited amount relating to bid or performance security will be returned to them by government and government undertakings. 
• An Entity DigiLocker will be set up for use by MSMEs, large businesses, and charitable trusts for storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks, and other business entities.
• The revamping of the credit guarantee scheme for MSMEs is to take effect from 1st April 2023 through the infusion of 9,000 crores in the corpus. This will enable additional collateral-free guaranteed credit of ` 2 lakh crore. Further, the cost of the credit will reduce by about 1 percent.

Micro enterprises with a turnover of up to ` 2 crore and certain professionals with a turnover of up to` 50 lakhs can avail of presumptive taxation. Enhanced limits of ` 3 crores and ` 75 lakhs respectively, to the taxpayers whose cash receipts are not more than 5 percent.