ESOPs To Capital Gain Parity: Startup Ecosystem's Long-due Wishlist

While an interim budget does not usually have big announcements, there are some areas where long-term policies should not be delayed. Parity for equal capital gains tax rates for listed and unlisted companies is among one of them.

"We expect the government to continue its support for the startup and VC ecosystem like it's done in the last few budgets. One of the main things is harmonisation of the capital gains tax rates between listed and unlisted companies. Doing this will attract more investment into privately held companies. Similarly, a tax exemption that could be provided to investments from sale proceeds or one startup to another would be good and will encourage more angel investments," says Orios Venture's Partner Sukhmani Bedi.

Clarity Of Tax Imposed On ESOP

Also, Employee Stock Ownership Plans (ESOPs), which are essential for attracting and retaining talent, are now subject to two separate taxation regimes. "After a year of muted startup valuation and a difficult fundraising environment, the venture ecosystem is expecting both immediate relief as well as long-term policy support. To bolster startup growth, favorable tax policies related to carry-forward losses and employee stock options would be a welcome move," Omnivore Managing Partner Mark Kahn states.

PLI Programs

Production for specific products has shown to be incredibly successful in raising manufacturing and cutting expenses. "We should try to increase the scope and coverage of the PLI program to include many more sectors. Also more clarity in regulations regarding disbursements will be welcomed," Bedi adds.

Kahn further highlights that from a macro perspective, there will be continued focus on uplifting rural India, especially by reducing out-of-pocket expenditure on necessities and emergencies. Given this administration's consistent support to boost digital payments, I expect this interim budget to make favourable provisions for accelerating credit growth, financial inclusion and digital enablement of financial services in rural India.

Climate Action Space

In the climate action space, amidst the various incentives already in place, "I look forward to public-private partnerships to fast-track green initiatives such as biomaterials, sustainable packaging and climate-resilient agriculture innovations. Finally, as this will be an interim budget ahead of the upcoming elections, the government may also choose to build upon the provisions laid out last year. In that case, I look forward to a policy level push for uplifting alternative crop categories in natural resource-challenged regions," Kahn adds.