Budget 2021: Few hits, many misses for IT sector, startups

The expectations of more policy related clarity on companies working out of Special Economic Zones, tax rebates, employee related measures were found amiss. 

Published: 02nd February 2021 05:51 AM  |   Last Updated: 02nd February 2021 07:50 AM   |  A+A-


Image used for representational purpose only.

Express News Service

BENGALURU: The Union Budget 2020-21 scored few hits but  had many  misses when it comes to India’s IT/ITES industry and startup sectors. 

The Modi government’s digital first approach — right from Rs 50,000 crore allocation for  R&D to digital census — did find praiseworthy mentions among tech industry leaders, however the expectations of more policy related clarity on companies working out of Special Economic Zones, tax rebates, employee related measures were found amiss. 

Although Finance Minister Nirmala Sitharaman’s claim of a big boost to startups by extending the tax holidays till March 31, 2022, is perceived as an worthy move, the announcement came with a rider that only those firms registered with Inter Ministerial Board (IMB) would be able to claim the benefit.

Ashish Agarwal, Head Public policy , Nasscom told this newspaper that only 400 startups, out of 4000 registered with DPIIT, would be able to avail the tax holiday benefit.

Besides, the concern of tax benefits of Employee Stock option plan (ESOPS) remained unaddressed, which pertained to exemption of taxes till the stocks are vested.

However, registration of one person companies with no restrictions on paid-up capital and turnover as well as easing the compliance burden for NRIs are seen as positive moves for startup ecosystem.

K Ganesh, serial entrepreneur and promoter of companies such as Big Basket, said that by including companies that have a capital base up to Rs 2 crore in the category of small companies unlike the current limit of Rs 50 lakh would provide compliance benefits to over 2 lakh companies.

Limited Liability Partnerships are now decriminalised and the flexibility to convert a company to any form or LLP is going to increase the ease of starting business. 

However, Ganesh said the budget should have made a strong push for government purchases from Indian startups.

This would benefit atma-nirbar goals, drive employment and create a greater demand for indigenous startups.

The finance minister’s announcement of setting up a world class fintech hub as well as allocating Rs 1,500 crore for digital payments was a reason for cheer especially since UPI transactions have crossed 2 billion a month mark during the pandemic. 

“I’m hoping the funds will be used towards developing alternatives to Zero MDR policy and initiatives towards bringing digital financial literacy in vernacular languages. These will instil trust in the system and accelerate adoption from MSMEs and entrepreneurs who are apprehensive towards moving money digitally,”  Harshil Mathur, CEO & Co-founder of Razorpay, said.


Rs 1,500 crore allocated for giving a boost to digital transactions.

Finance Minister Nirmala Sitharaman said that the money will fund a scheme that “will provide financial incentive to promote digital modes of payment”.


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