Sudhanshu Rastogi, CEO
ASR Ventures Pvt Ltd, Vision StartUPs Accelerator
Lucknow: The Union Budget 2025-26 has delivered a major push to India’s startup ecosystem with a series of financial and policy incentives aimed at fostering innovation, attracting investments, and easing regulatory burdens. Recognizing startups as key drivers of economic growth and employment, the government has introduced several measures that will provide both short-term relief and long-term growth opportunities.
A key highlight is the introduction of a Rs 10,000 crore Fund-of-Funds, designed to boost startup investments beyond the existing fund established in 2016. The original initiative had mobilized approximately Rs 91,000 crore in Alternative Investment Fund (AIF) investments, benefiting over 1,180 startups and generating more than 50,000 jobs. The new infusion is expected to further accelerate entrepreneurial activity and drive sectoral growth.
In another significant move, the government has extended the tax holiday for startups, allowing eligible companies to avail 100% tax exemption on profits for three consecutive years within the first 10 years of incorporation. The eligibility period for this benefit has now been extended until March 31, 2030, giving more startups access to crucial financial relief.
The budget also brings clarity on capital gains taxation for Alternative Investment Funds (AIFs) by classifying their securities as capital assets, ensuring that investment gains are taxed as capital gains rather than business income. Additionally, a new Deep Tech Fund-of-Funds will be introduced to support cutting-edge startups in AI, blockchain, and quantum computing, reinforcing India’s position as a global technology hub.
With additional measures focused on social security for gig workers and reduced compliance burdens, the 2025-26 Budget aims to create a more supportive environment for startups, fueling entrepreneurship and strengthening India’s economic growth trajectory.
Key Benefits for Startups from the 2025-26 Budget:
- Fund-of-Funds for Startups
The government has announced a Rs 10,000 crore Fund-of-Funds aimed at boosting investment in startups. This is a new fund which is over & above existing fund started in 2016 which collected around 91k cr. Investment under AIF and around 1180 Startups are benefited and more than 50k got employment.
- Extended Tax Holiday for Startups:
Startups can now enjoy a 100% tax holiday on profits for 3 consecutive years out of the first 10 years of incorporation.
Extended Eligibility: The eligibility for claiming this tax holiday has been extended by 5 years, now valid until 31 March 2030.
- Capital Gains Tax Amendment for AIFs
Securities held by Alternative Investment Funds (AlFs) are now explicitly classified as capital assets, meaning gains from their transfer will be taxed as capital gains instead of business income.
- Deep Tech Fund of Funds
A Deep Tech Fund of Funds will be explored to support next-gen tech startups, particularly in fields like Al, blockchain, and quantum computing. This initiative is a targeted push for innovation-led growth. By backing deep-tech startups, the government is fostering technological advancements, which are critical to India’s positioning in the global tech ecosystem. This would help position India as a leader in cutting-edge sectors.
5.Social Welfare for Gig Workers
Initiatives will be introduced to provide social welfare benefits to India’s gig workforce, including healthcare coverage, identity cards, and e-Shram portal registration. Startups in the gig economy and sharing economy sectors (e.g., food delivery, and ride-hailing) will benefit from this formalization. It will help them attract and retain talent by offering workers more security and benefits, thereby enhancing productivity.
6.Reduced Compliance Burdens:
Measures like simplified transfer pricing and the withdrawal of TCS on goods sales will reduce the administrative load, allowing startups to focus more on innovation and business growth.
