On February 1, 2022, Finance Minister Nirmala Sitharaman announced the setting up of an expert committee to study and suggest changes to remove end-to-end frictions---in regulations and taxes for India's PE and VC investors. The committee was also mandated to identify potential "accelerants" to make India a top investment destination.
As we head towards Budget 2023, the committee has not only been set up, but has also submitted its report to the FM. In fact, the Indian venture and alternative capital association or IVCA-- met the committee and flagged off as many as 160 issues that required reform.
Particularly, the long-standing ones. Such as the disparity in long-term capital gains tax on sale of unlisted versus listed shares. The double taxation of ESOPs, the urgent need to put to work large unused pool of domestic capital among many others.
Before submitting the report, the committee's chairperson M Damodaran told CNBC-TV18 that the committee has indeed taken a hard look at regulations that are perhaps past their "sell-by date". So, there is hope that this year's budget could put in place more "accelerants" for the Indian startup ecosystem.
More so after Budget 2022, which was called 'a Budget for Digital India' this year, the finance minister could once again look at giving a tech impetus across sectors from agriculture and healthcare to education and financial inclusion.
With exactly a week to go to the Budget speech on the 1st of February, CNBC-TV18 spoke to Gopal Srinivasan, Chairman & MD at TVS Capital Funds; Rema Subramanian, Co-Founder of Ankur Capital; and Vineet Rai, Founder of Aavishkaar Group on what startups and their investors want from Budget 2023.
Subramanian suggests that the ease of doing business should be further streamlined to support the growth of startups. She states that the current taxation regime is not very startup-friendly, which can hinder the growth of the industry. The current tax laws lead to a situation of double taxation, which serves as a double whammy for startups.
Srinivasan, believes that the upcoming budget should recognize the Alternative Investment Fund (AIF) industry as an integral part of all laws, just like Mutual Funds (MFs) and Non-Banking Financial Companies (NBFCs). He stated that elements of AIFs should be included in tax laws to help the industry thrive. He hopes that this will be an "Atmanirbhar AIF Budget" that will support the growth of the industry.
Meanwhile, Rai suggests that the budget should help in opening up the coffers of insurance companies, to provide more capital for the economy. He believes that it is important to find a balance between foreign and domestic capital, to ensure sustainable growth.
For the entire discussion, watch the accompanying video