With the upcoming Union Budget, the finance industry in India is abuzz with anticipation. Key stakeholders, from venture capitalists to startup founders, have voiced their expectations and concerns. The overarching theme is a call for reforms that would stimulate investment, foster innovation, and ease the tax burden on both individuals and businesses. This story delves into the insights of industry experts who outline their hopes and recommendations for the upcoming budget, highlighting critical areas that require attention from the Honourable Financial Minister.

Mr. Anil Joshi, Managing Partner, Unicorn India Ventures, emphasizes the pressing need to remove the Angel Tax, a demand that has long been echoed by the venture capital industry. He explains, “The venture capital industry is very young and has certain expectations from the Honourable Financial Minister. Removal of Angel Tax has been a long-standing demand of the industry. Stakeholders of the ecosystem have made representations to the government to find a solution. Investments at early stages are often made in young companies with limited resources. It becomes tedious and non-productive for everyone, and it also discourages potential investors due to the fear of coming under tax authorities’ scrutiny. It’s a long-pending demand, and we wish the Hon. FM takes it up in the upcoming Budget. The solution will encourage many potential taxpayers to invest in this asset class.”

He stresses the need to align long-term gains for venture capital entities with those of listed entities and calls for speedier approval processes for overseas investments, which currently take too long.

Adding to this, Mr. Manoj Agarwal, Co-founder and Managing Partner, Seafund, focuses on the importance of bolstering the deep tech ecosystem in India. He states, “I have high hopes for the upcoming budget to strengthen the deep tech ecosystem in India. The government has made encouraging statements about supporting this sector, and I believe it is crucial to provide more backing at the seed stage. Deep tech startups often require significant research and development, which may not attract early-stage investment from the private sector. A dedicated fund of funds to support investors willing to take the plunge into deep tech is vital.”

Additionally, he highlights the need to address the issue of ‘reverse flipping,’ facilitating an efficient and tax-effective way for businesses built in India but headquartered abroad to return. Mr. Agarwal believes that a simplified GST tax regime for funds and the removal of angel tax would free up domestic capital for early-stage funding, which is crucial as the funding winter thaws slowly.

Similarly, Mr. Rohan Bhargava, Co-founder, CashKaro, brings attention to income tax reforms. “We are closely watching the discussions around income tax reforms in the upcoming budget. The current tax rate for earnings above ₹15 lakh stands at 30%, which is quite steep. The significant jump in tax rates from ₹3 lakh to ₹15 lakh highlights the need for a more gradual increase. Raising the income threshold before any tax is levied from ₹3 lakh to ₹5 lakh would provide individuals, especially those in the lower earning bracket, with more disposable income. This change would boost consumption, increase savings for the middle class, and provide positive momentum for the e-commerce industry.”

Mr. Bhargava also underscores the need for continued support for the startup sector, especially with the upcoming end of the Startup India Seed Fund scheme in 2025. He advocates for the complete removal of angel tax regulations to foster a more conducive investment environment and stresses the importance of addressing AI-related regulations to prevent bottlenecks in innovation and growth.

The upcoming Union Budget presents a crucial opportunity for the Indian government to address the needs and concerns of the finance industry. By removing the Angel Tax, simplifying the taxation framework, and providing more support for deep tech startups, the government can create a more favorable investment climate. Additionally, income tax reforms and continued support for the startup sector will boost consumption, savings, and innovation. As the finance industry eagerly awaits the budget announcement, it remains hopeful that the Honourable Financial Minister will take recommendations from industry experts into account to drive economic growth and development.