What the Union Budget 2018 has In Store for Indian Start-Ups

The Union Budget 2018 for the upcoming fiscal year announced today had the following information for start-ups.

Better regulations

The government will devise better regulations to govern angel and venture capital investments in start-ups, Finance Minister Arun Jaitley said on Thursday. The budget, however, didn't mention any specific policy.

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"Venture capital funds and angel investors need an innovative, special development and regulatory regime for their growth. We have taken a number of policy decisions including launching of the startup in India program building a robust investment ... taxation regime. We will take additional measures to strengthen the environment for their growth," Jaitley said in his speech.

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He also said that the government will explore the use of blockchain to improve governance.

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Expansion of financial technology

The finance minister also said that the government will introduce measures to help the expansion of financial technology start-ups in order to make it easier for small and medium enterprises to access capital.

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Funds for adoption of new technology

The industry seems to be welcoming the move to allocate funds to boost the adoption of new technologies like AI in India. FM Arun Jaitley has announced a massive budgetary allocation for the Department of Science and Technology (DST).

"To boost research, training and skilling in new technologies, the DST will launch a mission on cyber space to support the establishment of centre of excellence," he had said. "(To this end) I have doubled the allocation on the Digital India BSE -3.09 % program to Rs 3,073 crore in 2018-19," he had added.

Five lakh Wi-Fi hotspots in rural areas, and hybrid instruments to attract venture capital investment all found mentions in Jaitley’s speech.

Measures for existing start-ups growth

The government would take additional measures to strengthen the environment for start-ups growth and “successful operation” of alternative investment funds (AIF) in India.

Policy for Hybrid Instruments

Further, the government plans to evolve a separate policy for hybrid instruments. This will include convertible bonds, preferred stocks, equity swaps and structured notes – to attract foreign investment in startups and venture capital funds.

Reduction of income tax for MSME

In an attempt to address the problems faced by micro small and medium enterprises (MSME), the Union Budget reduced the income tax to 25%. This will be applicable to all small companies with annual turnover of up to Rs 250 crore.

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