 "Budget 2023-24 Expectation: Government must provide tax relief for fintech startups")
India boasts of a staggering 87 per cent adoption rate of fintech, significantly greater than the global average of 64 per cent. Consequently, the fintech industry is set on a steep growth trajectory, expected to reach Rs 9.2 billion at a CAGR of 24.96 per cent between 2022 and 2027. Supported by the robust startup ecosystem, the fintech industry is shaping up to be a solid contributor to the nation’s GDP.
The sector is front-lining the cause of financial Inclusion in India and expects initiatives that will strengthen the relationship between fintech and banks. This will most certainly encourage continued innovation and help extend the reach of financial services to the unbanked population.
Tax relief for growing fintech startups
Fintech startups are hopeful for GST exemptions until a certain level of revenue is achieved. Liberalisation of the tax structure along with depreciation on the fixed assets used by fintech can go a long way in promoting advancement. Announcement of tax benefits for research and development activities would bolster the ideation and execution of differentiating financial products & services for the masses.
Continued push for digital payments
The recent Budgets introduced several incentive schemes to promote digital payments and we expect the momentum to continue in this year’s Budget. The UPI has augmented India’s payments and collections infrastructure and has penetrated the unserved and underserved population in semi-urban and rural regions. New guidelines regarding the UPI transaction cost will be a major development, providing a much-needed impetus to the sector’s expansion.
Impact Shorts
More ShortsTax relief for fintech startup employees
A strict qualification criterion accompanied the tax benefits introduced in the previous Budget. It aimed to resolve the dual taxation issue but most startups could not reap the benefits. ESOP holders in fintech startups can really gain from the tax being levied on the sale of shares rather than on the exercise of ESOP.
Revised regulations for fintech players, startups
Conscious revision of the regulations will help establish an enabling environment for fintechs to function and evolve. We expect to see regulations regarding digital currencies and how they will take shape in the workings of the industry.
Data security
Digitalisation has also given rise to various security threats such as data breaches, data loss, account hacking among others. Enhancement of data security measures is imperative & we expect the upcoming Budget to facilitate the same."
The writer is CEO and Co-Founder of PaySprint, a fintech venture. Views expressed are personal.
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