Holistic plan needed to spur domestic funding for startups: Nasscom

Startup ecosystem will fuel innovation for India and help create sustainable jobs, and a holistic plan needs to be worked out to spur domestic funding for startups, a top Nasscom official said on Friday.

Indian companies and domestic investors need to be encouraged to invest in startups, and a level-playing-field must be ensured between them and foreign investors, Debjani Ghosh, President of software association NASSCOM said at a panel discussion on IT initiatives announced in Budget 2021-22.

The measures announced in the Budget for startups are steps "in the right direction", given the importance of this ecosystem and its vital role in fuelling innovation and sustainable jobs, she said.

It is pertinent to mention here that the Budget has proposed to incentivise incorporation of one-person companies (OPCs) and extend certain tax exemptions by a year for startups, steps that will promote entrepreneurship and encourage NRIs to invest.

Ghosh lauded the IT initiatives outlined in the Budget and said a holistic plan also needs to be worked out that looks at aspects like how Indian companies and investors can be encouraged to invest in start-ups level-playing-field should be ensured between them and foreign investors.

"We have been talking about the need for domestic funding for startups. India must increase its pipeline for domestic funding. While the government has done a fantastic job of bringing in funds and the IT Ministry has done a fantastic job of not just bringing in funds but also giving business to startups, we also have to encourage domestic investors," she said.

Further, the current tax holiday that startups avail applies to only about 400 entities based on a defined process, she noted.

"We have been requesting that this should be opened up to all startups registered under DPIIT (Department for Promotion of Industry and Internal Trade), which will ensure that at least 40,000 startups are eligible and then it can make a real difference," Ghosh added.

Indian startups are competing at a global level, and their competitiveness and success, to some extent, hinges on attracting and retaining good talent, she said and added that ESOPs (employee stock ownership plan) was one such tool used by startups.

"...in the last budget, the Finance Minister had...extended ESOP taxation, but given that startups always have limited funds, we should not ask them to pay tax on ESOP until they sell the stock," she said.