Indian Startups Push for Tax Incentives in Upcoming Budget

New Delhi, Jul 11 (KNN) In a bid to boost innovation and growth, India's startup sector is lobbying for favourable tax incentives in the forthcoming Union Budget.

Industry leaders are calling for benefits similar to those enjoyed by the manufacturing sector, which has been a focal point of the government's 'Make in India' initiative.

Arpit Chug, CFO of Razorpay, emphasised the need for parity with manufacturing companies, stating, "Similar tax incentives should be considered for startups, especially those working to strengthen the Digital India initiative."

Chug highlighted the significant investments startups make in research and development (R&D) and technological infrastructure, suggesting that "weighted tax deductions and subsidies for R&D employee costs" could stimulate innovation and job creation within the ecosystem.

The retention of talent remains a key concern for startups. Mayank Kumar, co-founder and MD of UpGrad, advocated for easing the taxation on Employee Stock Ownership Plans (ESOPs).

Kumar noted that while ESOPs are designed as wealth-creation tools, the current high tax rates diminish their attractiveness to employees.

Echoing this sentiment, Dhiresh Bansal, CFO of Meesho, pointed out that ESOP-related taxes can reach up to 40 per cent. He argued that reducing these rates would incentivise skilled professionals to join startups.

Bansal also called for simplified tax compliance processes and lower tax rates for startups in their early years to alleviate financial pressures.

The gaming startup sector, which has been grappling with increased GST rates, is seeking clarity on taxation. Paavan Nanda, co-founder of WinZO, revealed that the industry has urged the government to levy GST on gross gaming revenue or platform fees, rather than on the entire pool. "This approach will ensure the sector's viability and foster growth," Nanda explained.

Additionally, the startup community is looking for resolution on the angel tax issue, which has been a point of contention in recent years.

As the Budget announcement approaches, these proposals reflect the startup sector's push for a more supportive tax environment. The industry argues that such measures are crucial for sustaining India's position as a global startup hub and driving economic growth through innovation and job creation.

(KNN Bureau)