In a respite for the startup ecosystem, the Centre on Thursday announced to extend tax benefits for startups and investments made by sovereign wealth and pension funds to March 2025.

Certain tax benefits to startups and investments made by sovereign wealth or pension funds as also tax exemption on certain incomes of some International Financial Services Centre (IFSC) units are expiring on March 31 this year.

“To provide continuity, I propose to extend the date to 31.3.2025,” said Finance Minister Nirmala Sitharaman while presenting the Interim Budget on Thursday.

“As for tax proposals, in keeping with the convention, I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct taxes and indirect taxes including import duties,” she added.

Anil Joshi, Managing Partner, Unicorn India Ventures, said that the extension of tax exemption to startups is a good gesture and provision for Rs 1 lakh crore toward sunrise segment at nominal or zero interest rate will certainly help small businesses.

“No change to direct and indirect tax was also expected, however we may see new rates in full budget to be proposed in July 2024,” he said.

Rishabh Goel, Co-Founder and CEO, Credgenics, said that in a bid to sustain the growth momentum of existing startups, the government has extended tax benefits by an additional year.

As many as 2,975 government-recognised startups have been granted Income Tax exemptions so far, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

Under the ‘Startup India’ programme, the government provides Income Tax exemption.

In September last year, the government notified new angel tax rules that comprise the mechanism to evaluate the shares issued by unlisted startups to investors.

Startups registered with the DPIIT were exempted from the new norms. The government highlighted that the exemption will benefit over 80,000 startups.