The Budget and its tryst with startups


By CA Vijaykumar Puri ~ Partner, VPRP & Co LLP, Chartered Accountants


a person stacking coins on top of a table
a person stacking coins on top of a table

Does Budget 2022 do enough for startups?

The short answer is – No.

We saw the rise of 44 unicorns in India during the last calendar year itself. Studies have shown that raising funds for a startup in India has never been easier.

The Hon’ble Finance Minister used the words “digital”, “startups” and “technology” in historic proportions in Budget 2022. In one of the many firsts, the Speech also acknowledged that there are various on-ground challenges plaguing the startups and new businesses in India.

It was indicated that the Government will form an expert panel to look into the same and resolve those issues. This is a laudable move. Yet it gets us nowhere.

The tax and regulatory environment is not geared to handle the booming venture capital and private equity investment in Indian start-ups. It definitely helps to be officially recognized as a start-up which provides tax breaks, angel tax exemptions etc. under Income tax laws.

The official start-up recognition scheme is not completely inclusive as it requires the start-ups to be doing something “innovative” in order to qualify as a start-up. This has led to merely 54,000 registrations under the start-up scheme since past 6 years.

Mind you, over 1.5 lakh companies are incorporated each year alone in India. With a booming funding environment, investors are not selectively investing in “innovative” companies anymore.

Over the years, various round table discussions have been held with bureaucrats and even the Prime Minister and various industry representations have been submitted as well – all of which ask for widening the definition of a start-up.

The Budget 2022 was historic for start-ups but in many ways, it has actually done close to nothing.