Takeaways for Startups from Budget 2021

While the Union budget 2021 was high on expectations, it brought some encouraging news that could inadvertently accelerate growth in the 'startup' domain. To begin with, in a major push to attract investments by Non-Resident Indians (NRIs), residency limits were reduced to 120 days. Supplementing this was one year tax exemption could boost the prospects for start-ups in India. In line with the aim of attracting investments domestically, The National Association of Software and Service Companies(NASSCOM) had suggested:

  • Easier compliances
  • Simplifying tax structure

With various sources projecting a surge in economic growth rate and the economy ready to take off, some noteworthy announcements could attract the interest of Indian startups primarily in the healthcare and agriculture sectors.

Massive Allocation for Healthcare-

With a focus on revamping healthcare delivery institutions, Finance Minister, Nirmala Sitharaman announced the allocation of INR 2.23 lakh crore for the health sector. This could potentially bridge the gap between the urban and rural healthcare setup, especially in the post-Covid-19 scenario. Further, an increase of about 137 per cent from previous years, this substantial increase with the aid of public-private partnerships could spur startups in a range of healthcare domains including the delivery of vaccines, and diagnosis, etc. 

Impetus on Agriculture-

Budget announcements could translate into enormous opportunities for startups in the agriculture sector. The government has allocated INR 2.83 lakh crore for agriculture convergent with its vision to double the income of farmers in the country. Much attention has been paid towards incentivising the cultivation of high-value crops alongside a newfound interest in ‘seaweed farming’ which has been identified as an emerging area. Additionally, budgetary allocations encourage investment and interest in related sectors such as dairying and livestock marketing. Backed by significant budgetary allocations could motivate people to diversify away from cultivating traditional crops and open opportunities for startups in agri-tech and agribusiness. 

Another year of Tax exemption-

The highlight for the startup sector however is another year of tax exemption for Indian startups. Tax exemption has now been extended till April 1, 2022 and will take effect from April 1, 2021. This follows the government’s earlier decision to exempt startups from being taxed during the disruptive Covid-19 phase. With the third largest startup ecosystem in the world, India’s budget for 2021-22 could support New Delhi’s effort in encouraging startups across various sectors.