Union Budget 2015: Arun Jaitley allocates Rs 1,000 cr for tech start-ups

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26 Aug, 2025 12:21

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Devika Ghoshmoneycontrol.com

Finance minister Arun Jaitley in his first full-year Budget proposed to allocate Rs 1000 crore to provide support to IT and tech start-ups.

"Concerns such as a more liberal system of raising global capital, incubation facilities in our Centres of Excellence, funding for seed capital and growth, and ease of Doing Business etc. need to be addressed to create lakhs of jobs and hundreds of billion dollars in value," Jaitley said in his speech.

Keeping this in mind, he proposed to establish a mechanism to be known as SETU (Self-Employment and Talent Utilisation), for which he set aside the Rs 1,000 crore in NITI Aayog.

Jaitley said India has a well regarded and world-class IT industry with revenues of about USD 150 billion, over USD 100 billion of exports, employing nearly 40 lakh people directly.

He further said a lot of young entrepreneurs running business ventures or wanting to start new ones require latest technology. To facilitate technology inflow to small businesses at low costs, he proposed to reduce the rate of income tax on royalty and fees for technical services from 25 percent to 10 percent.

The IT sector's contribution towards India’s GDP and employment generation has been so exponential that it comes as no surprise that finance minister Arun Jaitley took special notice of the sector. The IT and ITeS sector employs almost 10 million Indians.

* The sector had expected Jaitley to push or promote investments in IT and convince entrepreneurs to adopt new technologies, along with announcements related to tax sops in a bid to incentivise software companies to invest in research and development (R&D) activities. Going into specifics, a CARE Ratings report indicated that the sector wanted clarity with respect to eligibility of IT/ITeS companies for weighted deduction on R&D expenditure.

* The sector also wanted the government to rationalise and simplify multiple levels of taxes like sales tax/VAT, CVD/excise duty and service tax on procurement of new software.

* The IT industry expected the government to take a stricter view as far as intellectual property rights (IPR) protection is concerned. The sector also hoped that the government will try and introduce more IT and software parks.

The industry also wanted the government to include IT/ITeS in the list of specified services for availing 150 percent deduction on expenditure incurred on skill development projects.

At the moment, IT companies are allowed a deduction of 15 percent on cost of investments. According to the CARE report, the IT sector wanted deduction under Section 32AC to be extended to IT/ITeS as such reduction in book profits will give the companies benefit of investments.

Reduction or withdrawal of MAT on SEZs will also be a positive for the sector.

According to Indian Software Product Industry Roundtable (iSPIRT), India has the capacity to build a USD 100 billion software product industry by 2025. The Indian software products market is expected to grow at 14 percent in 2014.

The IT-BPM sector is expected to add USD 13-14 billion revenues by FY15 end, according to National Association of Software and Services Companies (Nasscom). Nasscom had earlier forecast the industry to grow 13-15 percent this fiscal. It has now pegged FY15 IT sector growth at 13 percent. For FY16, IT services are expected to grow in the 12-14 percent range, it added. The domestic market in the next fiscal is slated to grow at 15-17 percent.

However, IT biggies such as Wipro and Infosys had sounded caution at a recent Nasscom summit. Wipro expects more new deals but believes it won't be enough to offset the shrinkage in the existing pipeline, while Infosys feels the global environment remains volatile and Europe is a big spot of bother. Infosys also sounded caution on currency headwinds.

* In his first Budget as the finance minister, Arun Jaitley had announced a pan India programme termed 'Digital India' with an initial outlay of Rs 500 crore to be launched.

* Had extended a sum of Rs 100 crore for promoting 'good governance'.