Budget 2023 Expectations: 5 major expectations for the Fintech sector from the Ministry of Finance
The Ministry of Finance met several market shareholders last week for the pre-budget meetings. The ministry also met with several fintech industry leaders and other experts to get their views. After the meeting, the fintech leaders expect that some major changes will be made by the ministry in the upcoming budget. Zee Business caught up with some of the leading fintech firms, including those who were part of the pre-budget meeting to get a feel for the expectations of the fintech industry from the upcoming budget.
Here are the five most important expectations for the industry from the upcoming Union Budget:
Corporate tax rates apply to domestic fintech companies. Services provided by Fintech companies registered under Section 65(12) of the Finance Act, 1994 are subject to GST at a rate of 18 per cent. “We expect some reduction in start-up taxes across the board without GST up to Rs 10 crore turnover annually. This will help SMEs build a stronger economy and help create more jobs,” said Ashwin Chawwla, Founder and CEO, Escrowpay. a digital payment platform with an open architecture.
They expect the Ministry of Finance to look at providing benefits in the form of additional depreciation on the fixed assets used by the Fintech companies, so that it will help save taxes for the companies. “Governments can also look at giving flat deductions (similar to deductions given u/s. 80-IA/ 80-IC of the Act) to all SMEs and small businesses (depending on the turnover) to increase the overall Fintech sector”, added Anita Basrur, Partner, Direct Tax, Sudith K Parekh &Co LLP.
FLDG or ‘first loan default guarantee’ is a kind of arrangement between a fintech company and regulated entity (RE), including banks and non-bank finance companies, where the fintech companies have to compensate the RE in the event of a borrower’s default. “Whether FLDG should be in place or not, the matter is pending with the Reserve Bank of India (RBI). There should also be skin in the game for the fintech partner. We have suggested some risk mitigation measures so that such partnerships are not harmful to consumers , says Soumee Bhatt, general counsel at BankBazaar.
The fintech sector expects more assistance from the government for better partnerships with the banks to strengthen the existing model. But there must also be a level playing field for both online and offline lenders, emphasized the industry experts. “RBI can have proper regulation in place which can govern the Fintech sector. This will give more clarity to the companies operating in the fintech sector and surely go a long way in regulating it. The growth of fintech can happen if digitization happens all over India including rural areas,” Basrur added.
The companies expect the government to take steps that will encourage partnerships between banks and gold loan companies to help make gold loans available to underserved communities in Bharat. To further meet consumer credit requirements and the working capital needs of business owners, the budget may introduce measures to ensure adequate liquidity for the organized gold loan segment. “With adequate capital, gold loan companies can leverage technology to streamline the process, expand their customer base, increase market penetration and enhance their online gold loan services,” said Anuj Arora, co-founder and COO, SahiBandhu, a digital lending. platform.
Major tax breaks were given to start-up employees in the previous budget to address the double taxation and ease the tax burden that employee ownership of ESOPs (ESOPs) has on employees. “There is a very strict eligibility criterion prescribed, so only a very limited number of young Indian companies can reap the benefits of this welcome move. So the industry recommends that the government extends this benefit to a wider set of young companies by relaxing the criteria,” said Bhatt from BankBazaar.
