Budget 2022: Progressive impetus needed to create a cohesive Edtech ecosystem in India

2021 was yet another great year for the edtech sector with huge capital inflows, and consolidation underlining the mammoth opportunity and value it presents for consumers and edtech companies. Edtech has played a significant role in ensuring continuity for learners even during a time of disruption in the traditional ecosystem. The year has also reinstated the dire requirement to reskill and upskill in a world where lifelong learning is the new mantra to address the evolved industry-led challenges for survival and success.

While edtech companies are playing a vital role in making quality trans-national education accessible and affordable for millions, it’s equally contributing towards creating a skilled workforce, thus accelerating the country’s GDP.  Therefore, with the Union Budget 2022 set to be announced soon, there are a few critical elements that can certainly enhance the online education sphere for further propelling radical change in the sector at large.

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Need tax-saving education scheme to encourage skilling

Rapid digitisation has certainly taken over the industry and every sector is witnessing evolution to an extent where employers are keen on hiring skilled talent with requisite knowledge around industry-driven skills. Given the current circumstances, it’s important that professionals are updated with the evolving domain knowledge, and it’s only possible when they are constantly upskilling.

However, in the current situation, professionals are hesitant in investing to upskill themselves, since it does not offer them a tax-break privilege. Unlike a variety of tax-saving mutual funds, there’s a need to introduce a tax-saving education scheme within the country to promote the upskilling culture at large. Also, there are certain tax benefits that one gets against the education loan for graduation/post-graduation – the same can be replicated for upskilling programs. Such opportunities will encourage millions to invest in their education and, will help them to claim tax deductions/benefits at a later stage.

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Union Budget 2022 could be an opportunity for the government to introduce such a progressive initiative which in turn, can have a two-fold impact on the economy – skilled workforce, and an enhanced GDP.

Such evolving circumstances can also introduce collateral benefits like more qualified teachers, upskilled educators/Subject Matter Experts (SMEs) for driving an immersive learning ecosystem, thus also accelerating India’s ambition of becoming the teaching capital of the world.

Attracting talent to startup ecosystem

ESOPs are a popular device in the corporate world, deployed to attract and retain talent. In today’s day and age, early ventures are frequently using the currency to balance CTCs against allotted ESOPs and generate wealth-creation opportunities for the employees. However, employees are liable to pay taxes at the time when the allotted shares are sold without any option to set off the gains against any future investments. Also, ESOPs are not treated the same way as listed equity.

For many early employees, they risk their career to build a startup, and even after holding ESOPs for 4-5 years, the taxation on ESOPs is very high. On the other hand - holding listed equity may get taxed at LTCG rates. The Government can help improve the ecosystem by revising the taxation on ESOPs and making it at par with listed equity taxation. The risk for the exercise remains the same as it is for normal stocks. The tax reduction on ESOP will help in making ESOPs an attractive tool to attract and encourage employees to enrol for the same.

The writer is Co-Founder & MD, upGrad. Views are personal.

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