– By Gaurav VK Singhvi
We are days away from the Union Budget 2023, and as usual, expectations are high. Often I get questions asking me about the need for tax rebates for angel investors and venture capitalists (apart from the expectations). Having invested in over 100+ startups, I understand that this asset class is highly illiquid. There is a need for tax rebates for angel investors and venture capitalists as they play a crucial role in driving innovation and economic growth by providing crucial early-stage funding to startups and small businesses. By offering tax incentives, the government can encourage more individuals and organizations to invest in these types of high-risk, high-reward ventures, which can ultimately lead to more jobs and economic growth.
In the upcoming Union Budget 2023, I would expect to see a reduction in Capital Gain Tax for unlisted investments as this can help to encourage angel investors and VCs to hold on to their investments for longer periods of time, which can provide more stability for the startup ecosystem. For startups, I am also hoping that the government takes the correct measures to promote entrepreneurship and startup growth and support innovation and technology development. Additionally, I would hope to see efforts to improve the ease of doing business in India, such as simplifying regulations and providing access to funding for small or early-stage businesses. Overall, I believe that a budget that prioritizes these areas would be beneficial for the Indian economy and society as a whole.
As an angel investor, I would expect some measures to be taken by FM Sitharaman that are conducive to the growth of the startup ecosystem in India. Some of my expectations from the Union Budget 2023 would be:
- Tax incentives for angel investors and venture capitalists to encourage investment in early-stage companies
- Simplification of regulations and compliance procedures for startups, to make it easier for entrepreneurs to start and run a business
- Access to funding opportunities for startups, such as Increased government funding and venture capital
- Encouragement for research and development in cutting-edge technologies, to foster innovation and technology development
- Support for incubation and acceleration facilities, mentoring, and networking opportunities for entrepreneurs
- A favorable regulatory environment such as ease of compliance, ease of doing business, and simplification of tax laws
- Increased regulation on corporate governance of startups
- Encouraging ESG: This could include measures such as providing tax incentives for companies that adopt sustainable practices, creating a framework for sustainable infrastructure development, promoting sustainable agriculture, and encouraging investment in clean energy
- Increased focus on the development of tier-II & -III startup ecosystem
Often a budget is kind to certain industries, and I expect these industries will be prioritized by FM Sitharaman in the Union Budget 2023:
Technology and Digital Innovation: Includes startups working in areas such as artificial intelligence, machine learning, big data, blockchain, and the Internet of Things (IoT).
E-Commerce and Fintech: As the Indian economy is increasingly shifting towards digital channels, startups in these sectors will be key to driving economic growth.
Healthcare and Biotechnology: With an aging population and increasing healthcare costs, startups in these sectors will be in high demand as they can help to improve the quality and accessibility of healthcare.
ESG: With increasing concerns about climate change, startups in this sector are likely to receive attention as they can help to reduce carbon emissions and promote sustainable development. The budget could be in favor of the ESG sector by taking measures that promote sustainable development and encourage companies to adopt sustainable practices. This will not only align with the global trend of addressing environmental and social issues but also contribute to the long-term growth and stability of the Indian economy.
Agriculture: With farming being the backbone of the Indian economy, startups in this sector will be important for the rural development and growth of the country.
(Gaurav VK Singhvi is the Co-founder of We Founder Circle)