Union Budget 2025: What’s for Indian Startups?

“The alternate investment fund for startups has received more than Rs 91,000 crore in commitments.” These are supported by a fund of money established with the government of India’s contribution of Rs 10,000 crore,” Sitharaman stated in her budget speech on February 1. But she didn’t stop there. “Now, a new fund of funds with expanded scope and a fresh contribution of Rs 10,000 crore will be established,” she announced, signaling a new wave of assistance for India’s innovative hubs.

The FFS initiative, which was first introduced in 2016, has played an important role in giving money to businesses at various stages—early, seed, and growth—while also lowering reliance on foreign funding. The project, which is administered by DPIIT and maintained by the Small Industries Development Bank of India (SIDBI), was initially funded across the 14th and 15th Finance Commission cycles, depending on progress and fund availability.

Sitharaman stated that the new fund will not only assist budding enterprises, but will also facilitate local capital injection. “This initiative has encouraged homegrown venture capital funds, making India a stronger player in the global startup ecosystem,” she told reporters.

The renewed fund is consistent with the Startup India action plan, which was first announced on January 16, 2016. Since its beginning, the initiative has made a substantial contribution to India’s startup boom, resulting in a surge in domestic capital and innovation-driven businesses.

By providing financial assistance and removing capital barriers, the government hopes to stimulate the growth of Indian startups, bolstering the country’s status as a worldwide innovation engine.

The Union Budget 2025, which was closely monitored by India’s startup ecosystem, had a series of announcements for the sector. Entrepreneurs are now commenting on the plans and the Budget’s implications for the space. Here is what some entrepreneurs and CEOs said:

The Fund of Funds for companies, with a corpus of Rs 10,000 crore, has helped raise more than Rs 90,000 crore for investment in Indian companies. In response to the AIF industry’s request, the government has approved a new Fund of Funds worth Rs 10,000 crore. This financing support serves as a trigger for various AIFs to engage in Indian entrepreneurship in India.

The Union Budget contains sufficient provisions to unlock India’s demographic dividend. It promotes social justice by introducing new and reinforcing existing welfare measures, while tax and FDI reforms and simplifications boost demand.

Centres of excellence in AI focused on education in the #UnionBudget2025 continue to be a strong signal from the government on skilling and developing the strongest talent base and workforce from India for India and the globe.

This funding is a significant win for India’s startup environment. The Rs 10,000 crore Fund of Funds, together with increased tax breaks and regulatory reforms, will provide much-needed financing and ease of doing business for new ventures. The government’s emphasis on AI skilling and enabling first-time entrepreneurs, particularly women and SC/ST founders, would promote inclusion and create possibilities in India’s innovation ecosystem.

To make it easier for startups to do business, Finance Minister Nirmala Sitharaman proposed in her budget statement on Saturday extending the incentives offered under Section 80-IAC of the Income Tax Act for another five years. The incentives will be available to qualifying firms founded before April 1, 2030.

Section 80-IAC, which was implemented in April 2017, allows qualifying startups to receive 100% tax deductions on profits for any three consecutive years.

Startups registered with DPIIT (Department for Promotion of Industry and Internal Trade) under the Commerce Ministry’s Startup India programme are eligible for tax exemption under Section 80 IAC. Startups are eligible for tax breaks after being cleared for exemption within the first ten years of incorporation.

Importantly, only private limited or limited liability partnership firms are eligible for tax breaks under Section 80IAC. Furthermore, no preceding fiscal year’s turnover should have exceeded Rs 100 crore.