Budget 2025: Tax sops, investments in new tech on Indian startups wishlist

Industry body Nasscom has also called for the Centre to set up a dedicated fund to enable early-stage investments into tech startups between Series A and B rounds of fundraising

The Indian startup ecosystem is expecting tax concessions, incentives to promote emerging technologies such as artificial intelligence (AI), and investments in digital infrastructure in this year’s Union Budget to promote sectoral growth and attract funding.

 

Companies are hoping Finance Minister Nirmal Sitharaman will announce steps to streamline existing regulations across startup sectors such as financial technology, gaming, semiconductors, and healthtech, among others.

 

The National Association of Software Services Companies (Nasscom) in its list of recommendations for the Budget said the government should enable equity funding for deeptech startups. The Centre should also consider creating a dedicated deeptech fund for early-stage investments between series A and B rounds, it said.

 

Deeptech companies operate in the emerging tech space based on software and hardware capabilities including AI and machine learning (ML).

 

“Information Technology (IT) industry leaders anticipate incentives for adopting emerging technologies like AI, quantum computing, and blockchain, alongside tax relief for research and development (R&D). Strengthened support for skilling programmes, particularly in AI and cybersecurity, is crucial to bridging talent gaps,” said Neeti Sharma, chief executive officer (CEO), TeamLease Digital.  

 

Nasscom has also recommended that the government should create a dedicated Fund of Funds (FoF) for deeptech startups while designating an operating agency for the FoF.

 

"The FoF could establish an Investment Committee (IC), comprising of experts from the relevant priority areas. This expert committee can issue detailed guidelines for startups applying to the programme, assess their technical capabilities, and formulate objectives aligned with India's long-term interests," it said. IT also added that the deferment of the time of payment of tax on Employee Stock Option Plan (ESOP) should be made available to the employees of more start-ups.

 

Gaming sector

 

Gaming startups expect a concession in tax rates after online games, including skill-based and chance-based segments, were categorised under a 28 per cent goods and services tax (GST) in 2023. This was higher than a previous tax rate of 18 per cent on skill-based games.

 

“In 2025, we hope to see further incentives for gaming studios, particularly those developing made-in-India games which reflect our unique culture and stories on a global stage. Enhanced investment in Animation, Visual effects, Gaming, Comics, and Extended Reality (AVGC-XR) infrastructure, tax benefits for gaming startups, and support for training initiatives in gaming design and development can position India as a global hub for gaming innovation,” said Milind Shinde, founder and CEO, 88 Games.

 

Other companies in the gaming space added that they were expecting incentives in the gaming PC (personal computers) manufacturing segment and sops for semiconductor design in the upcoming budget.

 

“Provisions such as reduced customs duties on gaming hardware, tax incentives to foster growth, and investments in digital infrastructure could enhance accessibility and affordability for gamers across the country,” said Vishal Parekh, chief operating officer (COO), CyberPowerPC India.

 

Fintechs

 

Fintech firms are batting for a reduced tax deducted at source (TDS) across sectors they operate in as well as simplified compliance norms.

 

“We hope the government will further build on the reduction in the TDS rate from 1 per cent to 0.1 per cent for e-commerce operators, potentially extending additional support to enhance liquidity and simplify compliance processes. We also expect continued focus on promoting entrepreneurship and small businesses, possibly through expanded initiatives like Mudra Loans, which have proven vital for grassroots economic growth,” said Nilay Patel, founder and CEO, Easy Pay.

 

Fintech companies are hoping for lower TDS on business correspondent (BC) merchant accounts in the larger business-to-business (B2B) fintech category.

 

“There should be a reduction of TDS on BC merchant accounts while making transactions to ensure better cash flow and operational efficiency for BC agents. A government-backed fintech skilling program would also be a game-changer for the industry, fostering innovation, nurturing talent, and driving responsible and inclusive growth,” said Amit Nigam, COO, Bankit.