In 2021, emerging economy companies raised a record $42 billion through global and domestic funds. The number of Unicorns, companies with a billion-dollar valuation, almost doubled with 42 new ones joining the coveted club in the year, taking the total count to 83.

The year also saw an unprecedented amount being returned to startup investors exits through public market offerings, secondary sales and strategic buyouts finally took off.
A report by IVCA-EY showed that exits worth $43.2 billion were made through 280 deals. The startup ecosystem, including the venture capital and private equity funds that back such upcoming companies, have made a joint representation to the government outlining the gaps in the taxation system and point-by-point demands for the upcoming budget.

Budget recommendations

1) Overhaul of AIF taxation: One comprehensive tax code for all startups and funds.

2) Domestic institutional funds for startups: More funds on the lines of one by the Small Industries Development Bank of India. IRDA and PFRDA fund of funds can unlock and divert the domestic pools in a safe manner for startups.

3) Parity in treatment of capital: Treat domestic capital at par with the public market capital and bring parity in the way capital gains are taxed.

4) Taxation on ESOPs: Tax ESOPs at the time of sale, a long-standing demands of the industry.

Gopal Srinivasan, founder, TVS Capital Funds and chairman, IVCA

“For India to be a $5 trillion and then a $10 trillion economy, we will need system-wide framing of all regulations and tax laws, unlocking the power of domestic institutional capital, and hence bring uniformity in how we look at the private pools of capital.”

Sameer Nigam, co-founder and CEO, PhonePe

“To support UPI’s exponential growth and to keep onboarding lakhs of new merchants across India onto UPI, the industry needs to invest Rs 4,000- 5,000 crore annually. Therefore, we would request the government to consider reversing the zero MDR or increase the subsidy to Rs 4,000-5,000 crore annually for next year.”

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