Union Budget 2025: Nirmala Sitharaman extends period of incorporation for startups till 2030

Finance Minister Nirmala Sitharaman has proposed that startups incorporated by April 1, 2030 can avail tax benefits under Section 80-IAC of the Income Tax Act, provided they are eligible, extending the deadline by five years.

“We continue to support the Indian start-up ecosystem. I propose to extend the period of incorporation by 5 years to allow the benefit available to start-ups which are incorporated before April 1, 2030,” the Finanace Minister said in her budget speech on February 1.

Previously, startups incorporated between April 1, 2016 and March 31, 2024 were eligible for tax benefits under the Startup India program. The budget 2024 extended this deadline to March 2025, before extending it again to March 31, 2030, now.

These benefits include a three-year tax holiday, exemption from long-term capital gains tax, and exemption from tax on investments.

To avail the benefits, startups must be recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) and have annual turnover of over Rs 100 crore, among other criteria.

India currently has over 1.64 lakh DPIIT-recognised startups, according to DPIIT’s website.

Industry stakeholders have lauded the move, which is expected to provide much-needed relief to early-stage startups.

“The FM announced a 5-year extension of the startup incorporation period, allowing more startups, including those established before January 2013, to enjoy benefits like extended tax concessions—a vital move as startups often require longer timelines to become profitable,” said Pankit Desai, Co-founder and CEO, Sequretek – a cybersecurity startup.

Funding booster shot

Aside from providing tax benefits to startups, the Finance Minister has also announced several initiatives to boost access to domestic capital for these companies.

The budget has expanded the scope of the Small Industries Development Bank of India (Sidbi) Fund of Funds for Startups (FFS) by allocating an additional Rs 10,000 crore in corpus to the scheme.

In addition to the FFS scheme, the government had also established a Credit Guarantee Scheme for Startups in January 2016 with a fixed corpus to provide guarantees to loans extended to DPIIT-recognised startups by banks, non-banking financial companies (NBFCs), and Sebi-registered venture debt funds.

The government also provides funding to startups through the Startup India Seed Fund Scheme (SISFS). Launched by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2021 with an outlay of Rs 945 crore, the scheme provides financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialisation.