Zerodha’s Nithin Kamath Advocates Tax Exemptions For Startup Investors Ahead Of Budget 2024
As the Union Budget for the financial year 2024-25 approaches, Nithin Kamath, the co-founder of Zerodha, has taken to X (formerly known as Twitter) to voice his opinion on one of the most pressing issues facing the Indian economy today: unemployment. Kamath’s solution? Tax exemptions on startup investments.
Kamath’s Argument
In his social media appeal, Kamath elaborated on the critical issue of structural unemployment plaguing the Indian economy. He passionately argued that to achieve balanced economic growth, it’s essential to pave the way for entrepreneurship, emphasizing the potential of local initiatives. “One of the biggest challenges the Indian economy faces is structural unemployment among youth. Growth will always be uneven unless this improves. Part of the solution is to do everything to encourage entrepreneurs, even in small towns and villages in India. VCs will never go to these areas. Which means other wealthy people are the best hope,” Kamath explained.
He advocated for policy changes that would incentivize investments in startups, particularly for investors outside the conventional venture capital (VC) spheres. He pinpointed the current limitations within tax legislation, notably section 54F, which provides tax exemptions on capital gains from asset sales if the proceeds are reinvested in residential property. Kamath suggests that expanding this to include investments in startups could significantly encourage broader participation in the startup ecosystem. “One of the things I hope the budget addresses is section 54F… Including investments in startups along with investments in residential property can make startup investing mainstream. Even though some people may misuse the law, the potential upside is infinitely greater and worth the minor risk,” he added.
Government Moves to Support Startups
In alignment with Kamath’s viewpoint, there have been strides toward easing the funding avenues for startups. Notably, the Department for Promotion of Industry and Internal Trade (DPIIT) has made a proposition to eliminate the angel tax that has burdened startups. This move is seen as a significant step towards fostering a more conducive environment for startup finance, removing what has been a contentious hurdle for many emerging companies and their investors.
In summary, Nithin Kamath’s call to action comes at a time when India is grappling with considerable economic shifts. By focusing on entrepreneurship and providing the necessary support through tax incentives, there’s an opportunity to address critical issues like unemployment while stimulating economic growth. As the government considers its next steps, the startup community remains hopeful that these suggestions find their way into the upcoming budget, signaling a new era of innovation and job creation across the country.
