Additionally, the corporate tax rate for foreign companies has been reduced from 40% to 35% to attract foreign capital for India's development needs. The government also plans to simplify rules and regulations for foreign direct investment and overseas investments, further promoting economic growth and innovation.
“Our government will seek the required legislative approval for providing an efficient and flexible mode for financing leasing of aircrafts and ships, and pooled funds of private equity through a ‘variable company structure’,” added Smt. Sitharaman.
To facilitate foreign direct investments, nudge prioritization, and promote opportunities for using Indian Rupee as a currency for overseas investments, the Finance Minister announced that the rules and regulations for Foreign Direct Investment and Overseas Investments will be simplified.
In addition to abolishing the "angel tax," the Union Budget 2024-25 introduced several measures to support entrepreneurship and innovation:
1. Startup India Seed Fund: The government has proposed a ₹1,000 crore ($134 million) fund to provide early-stage funding to startups. This fund aims to boost innovation and encourage new ventures.
2. Relaxation of FDI Norms: To attract foreign investment, the budget proposes simplification of rules and regulations related to foreign direct investment (FDI) and overseas investments. This move is expected to facilitate capital inflow into Indian startups.
3. Corporate Tax Reduction for Foreign Companies: The corporate tax rate for foreign companies has been reduced from 40% to 35%. This reduction aims to attract foreign capital and promote economic growth.
4. Incentives for Electric Vehicles (EVs): The budget provides tax incentives for the manufacturing of EVs and their components. This measure encourages clean energy startups and promotes sustainable mobility solutions.
5. Research and Development (R&D) Incentives: The government plans to incentivize R&D activities by providing tax benefits to companies engaged in research and innovation. This will support technology-driven startups.
6. TDS on e-commerce operators from 1% to 0.1% : In the Union Budget 2024-25, the government has proposed a reduction in the Tax Deducted at Source (TDS) rate for e-commerce operators. The TDS rate, which was previously 1%, has been lowered to 0.1%, thereby improving cash flows and unblocking working capital for sellers. This move aims to ease compliance for e-commerce platforms and encourage digital transactions.
7. E-Commerce Export Hubs: The formation of E-Commerce Export Hubs is another transformative step and will enable MSMEs and sellers to access international markets. These hubs will serve as bonded zones, facilitating both exports and imports of e-commerce cargo. They aim to address the challenge of re-imports, which account for about 25% of e-commerce goods. Setting up E-Commerce Export Hubs will enhance the accessibility and efficiency of e-commerce exports and empower India’s many local sellers.
Overall, this year's budget offered measures collectively aim to create a conducive environment for startups, foster innovation, and drive economic growth.
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