The FY25 Budget drops a mixed bag of reforms—did it fuel the fire for Indicorns or just fan the paperwork pile?
As the curtain came down on FY 2024–25, the Union Budget delivered a series of tax and policy punches—some calculated, some confusing, and some that feel like they were written during a very long committee meeting. Indian startups, always braced for fiscal fine print, were at the heart of several key announcements.
From long-awaited reliefs to cryptic clauses, this year’s budget feels like that VC pitch meeting where the deck looked promising, but the term sheet left a lot to be desired. Let’s decode it: Did India’s startup ecosystem walk away with a win—or just another year of financial duct tape?
1. Tax Holiday Extended: Finally, Certainty Over Scraps
The Big Move: Eligible startups now have until March 31, 2030 to incorporate and still qualify for the prized 3-year 100% tax holiday under Section 80-IAC. Previously, this was extended on a year-by-year basis—a bureaucratic breadcrumb trail that left founders nervously refreshing the DPIIT portal every February.
The Fine Print:
The eligibility terms remain unchanged. Startups still need approval from the Inter-Ministerial Board (IMB)—a black box notorious for its opacity and unpredictability. Many startups that are revenue-positive, scalable, and tech-based have still failed to make the cut.
Example: Fintechs like Jar or agritech players like Bijak, which are gaining traction but not yet profitable, stand to benefit from the extended window. But whether they pass the IMB’s “innovative-enough” filter? That’s still a toss-up.
Verdict: Partial win. The five-year certainty is welcome, but the IMB bottleneck still acts like a VC gatekeeper with commitment issues.
2. AIFs Get Their Capital Gains Due—Finally Aligned with FPIs
The Update: In a long-overdue move, the budget proposes that Alternative Investment Funds (AIFs) will now have their securities explicitly treated as capital assets—ensuring gains are taxed as capital gains instead of business income.
Why This Matters: Until now, ambiguity over classification meant AIFs faced potential tax reclassification nightmares, sometimes with gains taxed at the higher business income rate.
This move puts AIFs on the same playing field as Foreign Portfolio Investors (FPIs)—crucial in a market where AIFs fund the majority of early-stage startups.
Case in Point: Funds like Blume Ventures, 3one4 Capital, and Chiratae Ventures—who often back seed and Series A rounds—will benefit from this clarity, encouraging more aggressive domestic deployment.
Verdict: Solid win. Tax parity with FPIs = domestic capital advantage.
3. Simplifying the TDS/TCS Headache on Goods Transactions
Before: Both TDS under Section 194Q and TCS under Section 206C(1H) could apply on the same sale transaction over ₹50 lakh—leading to absurd double deductions and counterparty chaos.
Now: TCS will no longer apply to such transactions starting April 1, 2025. Buyers deduct TDS, and sellers can breathe easier.
Impact for Startups: For product-based and B2B startups like boAt, Lenskart, or Zetwerk, this means simplified accounting and fewer heated emails with buyers over who’s deducting what.
Verdict: Operational win. Not headline-grabbing, but your accountant just smiled.
4. Transfer Pricing Gets a Break (Finally Some Chill)
New Rule: Taxpayers can now apply an Arm’s Length Price (ALP) established in one year to similar transactions in the next two years, pending approval.
Why It Helps: Transfer pricing disputes are among the most contested tax issues, especially for SaaS startups and those with offshore parent-subsidiary structures.
Example: A startup like Freshworks, which juggles India-U.S. transfer flows, gets the benefit of reduced litigation risk and lower compliance costs.
Verdict: Peace offering. Startups get more predictability and fewer 100-page notices.
5. Crypto Reporting Tightens (Web3, You’re on the Radar Now)
What’s New: Platforms will be mandated to report cryptocurrency transactions starting April 1, 2026. This move expands the government’s web of transparency around the digital asset space.
Web3 Impact: Exchanges like CoinDCX and WazirX, and even emerging NFT platforms, now face added compliance—but also a hint of legitimacy.
Verdict: Neutral to positive. More paperwork, sure—but also a step toward normalizing crypto in India’s mainstream regulatory conversation.
6. TDS/TCS Overhaul: Bye-Bye to Compliance Overkill
Then: Higher TDS/TCS applied if the counterparty hadn’t filed returns—even if they had a PAN.
Now: Higher rates will only apply if the counterparty has no PAN—a major simplification that will reduce compliance gridlock and capital blockages.
Impact: Startups, especially B2B platforms and marketplaces like Udaan, will now avoid unnecessary cash flow issues and vendor headaches.
Verdict: Win. Cleaner system, less drama.
7. A New Fund-of-Funds + Deep Tech Booster Incoming
The government has announced:
- A new ₹10,000 crore Fund-of-Funds to energize startup funding.
- A Deep Tech Fund-of-Funds in the pipeline to back India’s emerging AI, quantum, and frontier tech innovators.
Context: Existing Fund-of-Funds via SIDBI faced red tape and slow disbursement. If execution improves, this could catalyze non-traditional sectors beyond fintech and e-commerce.
Example: Startups like Agnikul or QNu Labs could benefit from the Deep Tech push—industries that rarely make VC cut due to long gestation and tech complexity.
Verdict: Potential jackpot. If the funds flow faster than government file approvals.
8. Gig Economy Gets Some Love
Recognizing the precarious status of gig workers, the budget proposes:
- Identity cards
- e-Shram registration
- PM Jan Arogya Yojana coverage for ~1 crore workers
Why It Matters: For startups like Zomato, Urban Company, and Swiggy, formalization of gig work improves workforce security—and, over time, public perception.
Verdict: Progressive win. A move toward sustainable platform capitalism.
9. Regulatory Cleanup: Finally Coming for the Maze
A high-level regulatory reform committee has been proposed to simplify the maze of compliance for non-financial sectors. Add to that fast-track merger proposals and an FDI raise in the insurance sector to 100%—and suddenly, the Ease of Doing Business narrative has fresh legs.
Verdict: TBD. Execution is everything
- Tax holiday for startups extended to 2030—but IMB filters still in place.
- AIFs now taxed under capital gains—finally aligned with FPIs.
- TCS removed on sale of goods over ₹50 lakh—less confusion.
- Transfer pricing & crypto reporting simplified—regulatory maturity showing.
- Fund-of-Funds + Deep Tech boost incoming—potential fuel for future moonshots.
- IMB approvals and fund delays still problematic.
So… Did Startups Win or Wipe Out?
Let’s call it what it is: a cautious win with caveats.
The government offered startups some solid policy and tax oxygen—especially the 2030 tax holiday extension, AIF capital gains clarity, and crypto transparency. But structural roadblocks—like IMB approval bottlenecks and sluggish fund disbursals—still lurk in the wings.
The FY 2024–25 budget wasn’t a jinx. But it also wasn’t a jackpot. Think of it as a decent runway extension—enough to keep Indicorns flying, but not enough to guarantee they’ll land a moonshot.
