As Finance Minister Nirmala Sitharaman prepares to unveil her seventh straight Union Budget today - the first of the Modi 3.0 government—the Indian startup ecosystem has high expectations. While many entrepreneurs want the Budget to address other concerns including corporation tax, Section 68 of the Income Tax Act, and redistribution of taxing regimes, others are looking forward to the introduction of new programs to increase domestic investments.

EV Sector

To encourage EV adoption, manufacturers are focusing on the third version of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) program in addition to manufacturing and sales incentives. The government's ability to expand market prospects has been the dream of other developing industries, such as the drone business.

Edtech Industry

In the meanwhile, the edtech industry is looking for a lower tax rate on online education as it navigates financial issues and the fallout from BYJU's collapse. Along with more regulations to support the development of homegrown gaming gear and game creation, gaming startups also accomplish this.

AI is the talk of the town, and a lot of industry insiders say that in order to fully use the new technology, more work needs to be done than just the India AI Mission.  However, the Economic Survey 2023-24, which was presented to the Parliament on Monday, stated that the introduction of AI has created a "huge pall of uncertainty" about how it would affect workers of all skill levels.

It also warned of the lack of private capital and forecast GDP growth for the current fiscal year at 6.5–7%. The poll also emphasized the need to develop 78.5 lakh jobs per year in the non-farm sector, a large portion of which will come from the renewable energy industry, which is predicted to draw investments of Rs 30 lakh billion by 2030. The future of the Modi 3.0 government's startup ecosystem will be decided by the Union Budget. 

This year, the Indian venture capital (VC) and private equity (PE) ecosystem's top requests are to simplify taxation, loosen the rules on defining what qualifies as a company, and provide businesses with access to domestic funding.

IT sector

India's $250 billion technology sector is mostly made up of R&D-oriented corporations, IT services providers, and business process management organizations.

The sector anticipates that the next Union Budget would streamline tax regulations to facilitate corporate operations and support cutting-edge innovations like artificial intelligence. Furthermore, India's IT sector association NASSCOM suggests enhancing the transfer pricing regime's tax competitiveness to increase India's exports of IT services and facilitate transactions for Global Capability Centers (GCCs).

The industry is hoping that the Union Budget would include policies that promote more investments in disruptive technologies like artificial intelligence (AI) and genetic intelligence (Gen AI). Additionally, it is essential to motivate and support investment by both public and private businesses to increase funding for cybersecurity technology, according to Rajarshi Bhattacharyya, Co-founder, ProcessIT Global.

Sector expectations: Padmaja Ruparel, co-founder of Indian Angel Network, suggests that Indian colleges be permitted to invest as trusts in companies beyond the incubator model, akin to the US endowment funds, in order to open up new sources of funding.

The ecosystem has long requested parity between the taxes on long-term capital gains and short-term capital gains for listed securities and startups. This would help companies retain talent by eliminating the need to tax stocks issued under employee stock options twice. In a statement to the finance minister earlier this month, the DPIIT, a division of the Ministry of Commerce, suggested doing away with the "Angel Tax."