Nithin Kamath, co-founder of Zerodha, has called for tax exemptions on startup investments, arguing that such measures could play a crucial role in combating India's unemployment challenges. Taking on the social media platform 'X' (formerly Twitter), he emphasised the importance of fostering entrepreneurship as a strategic approach to addressing unemployment concerns just days ahead of the Union Budget presentation for the financial year 2024-25.
Kamath highlighted that structural unemployment poses one of the most significant challenges to the Indian economy. He emphasised that achieving balanced growth will only be achieved once this issue is effectively addressed.
“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,” he wrote in his post on Friday.
“One of the things I hope the budget addresses is section 54F. This section offers tax exemptions on the capital gains earned from the sale of any asset if the proceeds are reinvested in a residential property. 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.
Meanwhile, in a proactive step aimed at enhancing startup funding, the Department for Promotion of Industry and Internal Trade (DPIIT) had previously proposed the elimination of the controversial angel tax imposed on startups.
Angel tax is a term used to denote the income tax imposed by the government on funding received by unlisted companies, particularly startups, in cases where the company's valuation exceeds its fair market value. This tax is applicable at rates exceeding 30 per cent, targeting instances where the valuation is perceived to be artificially inflated.