The government must provide tax breaks for fintech startups
Representative image. AFP
India boasts a staggering 87 percent fintech adoption rate, significantly higher than the global average of 64 percent. Accordingly, the fintech industry is set on a steep growth trajectory, expected to reach Rs 9.2 billion at a CAGR of 24.96 percent 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 championing the cause of financial inclusion in India and expects initiatives that will strengthen the relationship between fintech and banks. This will certainly encourage continued innovation and help expand the reach of financial services to the unbanked population.
Tax breaks for growing fintech startups
Fintech startups hope for GST exemption until a certain level of revenue is achieved. Liberalization of the tax structure together with depreciation of the fixed assets used by fintech can go a long way in promoting progress. Announcing tax benefits for research and development activities will strengthen the idea and implementation of differentiating financial products and services for the masses.
Continued pressure 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. UPI has expanded India’s payment and collection infrastructure and has penetrated the unserved and underserved population in semi-urban and rural regions. New guidelines regarding the UPI transaction charges will be a major development, providing a much-needed impetus to the sector’s expansion.
Tax breaks for fintech startup employees
A strict eligibility criterion accompanied the tax benefits introduced in the previous budget. It aimed to solve the problem of double taxation, but most startups could not reap the benefits. ESOP holders in fintech startups can really benefit from the tax being imposed on the sale of shares rather than on the exercise of the ESOP.
Revised regulations for fintech players, startups
Deliberate revision of the regulations will help to establish an enabling environment for fintechs to operate and develop. We expect to see regulations regarding digital currencies and how they will take shape in the way the industry operates.
Data security
Digitization has also given rise to various security threats such as data breaches, loss of data, account hacking, among others. Improving data security measures is essential, and we expect the upcoming budget to facilitate the same.”
The author is the CEO and co-founder of PaySprint, a fintech venture. Views expressed are personal.
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