Budget 2025 introduced a new Rs 10,000 crore Fund of Funds for startups, building on past successes of the FFS scheme. This fund aims to expand investments and access to capital in the vibrant startup ecosystem. The government also plans to extend tax benefits, supporting startups through an improved framework for innovation and economic growth.
In a significant boost to the Indian startup ecosystem, Finance Minister Nirmala Sitharaman announced a new Fund of Funds worth Rs 10,000 crore as part of the Budget 2025. This fund aims to invigorate startup investments and expand support for budding entrepreneurs, following the previous success of the Fund of Funds for Startups (FFS) initiated in 2016, which itself has garnered commitments exceeding Rs 91,000 crore from various sources.
Sitharaman emphasized that the FFS scheme transformed the funding landscape for startups by providing much-needed capital via SEBI-registered Alternative Investment Funds (AIFs). Rather than direct investments in startups, the Fund allocates resources to these daughter funds, empowering them to invest in various growing Indian startups through equity instruments. With India positioned as the third-largest startup ecosystem globally, the government aims for it to flourish even further.
In her speech, Sitharaman mentioned exploring a specific Deep Tech Fund of Funds initiative to support next-generation startups, indicating a commitment to nurture advanced technology enterprises. As part of the Ease of Doing Business reforms, she proposed extending the benefits under Section 80-IAC for startups by five years, ensuring budding ventures registered before April 1, 2030, can benefit from these provisions.
The previous July 2024 Budget had already set the stage for entrepreneurial growth, abolishing the controversial angel tax that had stifled investments. This tax was an income levy based on funding received by unlisted companies, primarily impacting angel investors and discouraging potential investments. Repealing it represented a long-awaited relief for the startup community, enabling unhindered growth and innovation.
The Indian startup scene has grown immensely, becoming one of the largest globally. In 2016, to support this burgeoning ecosystem, the government established the Fund of Funds for Startups (FFS), which has since connected startups with substantial capital through AIFs. This structured approach allows startups to access funding without the government making direct investments, facilitating greater financial flexibility and growth potential. The recent announcements aim to bolster this framework even further, indicating a strong commitment to innovation and entrepreneurship.
The announcement of the Rs 10,000 crore Fund of Funds reveals a solid commitment by the Indian government to foster innovation. By enhancing the FFS scheme and extending tax benefits, they aim to catalyze the next wave of startups that can propel economic growth and job creation. With these measures, India continues to position itself as a leading hub for technological and entrepreneurial advancement.
Original Source: www.tribuneindia.com
