Finance Minister Nirmala Sitharaman’s announcement to extend the deadline for startup incorporation by five years, until April 1, 2030, has been met with widespread approval from the startup ecosystem.
The extension enables startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) to benefit from tax advantages under Section 80-IAC of the Income Tax Act, 1961.
“We continue to support the Indian startup ecosystem. I propose to extend the period of incorporation by five years to allow the benefit available to startups, which are incorporated before April 1, 2030,” she stated during the Union Budget 2025-26 presentation on Saturday.
Describing the announcement as a significant win for startups, Sanjiv Singh, joint secretary of DPIIT, expressed enthusiasm about the positive development of the ecosystem.
As per Section 80-IAC, eligible startups can avail of a 100% tax exemption on profits for three consecutive years within 10 years from the year of incorporation. However, to qualify, startups must be recognized by the DPIIT and should have a turnover not exceeding Rs 100 crore in any financial year during the eligible period, according to Rahul Charkha, partner at Economic Laws Practice.
Abhishek A Rastogi, founder of Rastogi Chambers, highlighted that the extension would enable more startups to benefit from this crucial tax exemption, thereby improving their cash flow and profitability during the early years of operation.
Ashley Menezes, partner and COO of ChrysCapital, commented, “This additional runway will provide young ventures with a stable policy framework to scale, create jobs, and contribute meaningfully to India’s economic growth.”
The move has been warmly welcomed by startups across various sectors, with many viewing it as a significant financial relief and a catalyst for fostering entrepreneurship.
Aditya Kapoor, co-founder and COO of Astroyogi, an online astrology platform, expressed optimism about the Budget's impact on startups. “Budget 2025's focus on streamlining processes and fostering ease of doing business is commendable. The extended incorporation periods will create a more conducive environment for innovation and growth,” he said.
Moreover, the extension is coupled with the government's announcement of a Fund of Funds (FoFs) with a Rs 10,000 crore allocation.
“The Budget reaffirms India's commitment to economic growth, infrastructure, and inclusivity while fostering an ecosystem where startups and businesses can thrive. The extension of tax benefits provides the much-needed financial relief and stability for early-stage ventures,” stated Gajendra Jangid, co-founder of CARS24, a used car marketplace.
Pankit Desai, co-founder and CEO of cybersecurity firm Sequretek, termed the exemptions as crucial, adding, “The extension will allow more startups to enjoy benefits like extended tax concessions. It is a vital move as startups often require longer timelines to become profitable.”
Akshay Sarma, CFO of fintech firm Axio, emphasized the long-term benefits, saying, “Extending incorporation benefits for startups until 2030 provides long-term stability and incentivises innovation, contributing to sustained economic growth.”
In addition to the incorporation extension, the Budget also addressed several taxation issues, providing much-needed clarity for the Alternative Investment Fund (AIF) industry concerning “parity and clarity.”