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Finance Minister Nirmala Sitharaman’s announcement to extend the deadline for incorporation of startups by five years until April 1, 2030, has brought cheer to the ecosystem.
The extension allows startups, recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), to avail tax benefits under Section 80-IAC of the Income Tax Act, 1961.
“We continue to support the Indian startup ecosystem. I propose to extend the period of incorporation by five years to allow the benefit available to startups, which are incorporated before April 1, 2030,” she said while presenting the Union Budget 2025-26 on Saturday.
Referring to the announcement as a big win for startups, Sanjiv Singh, joint secretary of DPIIT, said it is exciting news for the startup ecosystem.
According to Section 80-IAC, startups can avail 100 per cent tax exemptions on profits for three consecutive years out of 10 years from the year of incorporation, said Rahul Charkha, partner at Economic Laws Practice.
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For startups to avail this, besides being recognised by the DPIIT, the turnover should not exceed Rs 100 crore in any financial year during the eligible period.
Abhishek A Rastogi, founder of Rastogi Chambers, said more startups can qualify for this crucial tax benefit which will enhance their cash flow and profitability during formative years.
“With extended tax benefits, startups become more attractive investment avenues for venture capital and angel investors, as higher profitability can now be expected in the early stages,” he said.
Ashley Menezes, partner and chief operating officer (COO), ChrysCapital, said, “This additional runway will provide young ventures with a stable policy framework to scale, create jobs, and contribute meaningfully to India’s economic growth.”
Startups across the domain have welcomed the move mentioning that the step will provide financial relief and foster entrepreneurship.
Aditya Kapoor, co-founder and COO of Astroyogi, an online astrology platform, said he is optimistic about the Budget’s impact on startups.
“Budget 2025's focus on streamlining processes and fostering ease of doing business is commendable. The extended incorporation periods will create a more conducive environment for innovation and growth,” he said.
Additionally, this extension comes with the announcement of the government creating a Fund of Funds (FoFs) by allocating Rs 10,000 crore.
“The Budget reaffirms India's commitment to economic growth, infrastructure, and inclusivity while fostering an ecosystem where startups and businesses can thrive. The extension of tax benefits provides the much-needed financial relief and stability for early-stage ventures,” said Gajendra Jangid, co-founder of CARS24, a used car marketplace.
Calling the exemptions a vital move, Pankit Desai, co-founder and chief executive office (CEO) of Sequretek, a cybersecurity firm, said, “The extension will allow more startups to enjoy benefits like extended tax concessions. It is a vital move as startups often require longer timelines to become profitable.”
Akshay Sarma, chief financial officer (CFO) of fintech firm Axio, said, “Extending incorporation benefits for startups until 2030 provides long-term stability and incentivises innovation, contributing to sustained economic growth.”
Other than the extension, the Budget also brought clarity on some taxation issues. This includes clarity on the AIF industry with respect to “parity and clarity.”
“Classifying securities held by an Indian AIF as a capital asset under Section 2(14) will ensure that all gains from their sale will be taxed as capital gains, not as business income. This was offered to foreign portfolio investors (FPIs) in 2014 to reduce litigation. Indian AIFs now have the same clarity,” said Siddarth Pai, founding partner, 3one4 Capital, and co-chair of regulatory affairs committee at the Indian Venture and Alternate Capital Association.
