Budget 2025: Rs 10,000 Crore Fund of Funds for startups announced

In a significant boost to India's startup ecosystem, Finance Minister Nirmala Sitharaman announced the creation of a new Fund of Funds worth Rs 10,000 crore.

This follows the success of the existing Fund of Funds for Startups (FFS) scheme, which has already attracted over Rs 91,000 crore in commitments.

"Now, a new Fund of Funds, with expanded scope and a fresh contribution of another Rs 10,000 crore will be set up," said Sitharaman in her Budget speech.

The FFS scheme, originally launched in 2016 with a corpus of Rs 10,000 crore, has played a transformative role in the growth of India's startup ecosystem. Rather than directly investing in startups, the scheme provides capital to SEBI-registered Alternative Investment Funds (AIFs).

These AIFs, also known as daughter funds, then invest in startups through equity and equity-linked instruments, providing much-needed capital to emerging businesses.

India, which has one of the largest startup ecosystems in the world, now seeks to cement its position as the best. Sitharaman also announced that a Deep Tech Fund of Funds will be explored to accelerate the growth of next-generation startups, ensuring the continued innovation and expansion of the startup sector.

As part of ongoing efforts to ease the startup process, the Finance Minister also proposed an extension of the Section 80-IAC benefits for startups. This extension would give eligible startups an additional five years, with the new benefit available to startups incorporated before April 1, 2030.

Last year's Budget saw the abolition of the angel tax, a long-awaited move aimed at stimulating investment into startups by eliminating tax on funding raised above the company's fair market value.

The government's efforts to remove barriers to investment and support entrepreneurship were welcomed by the startup community, providing a more conducive environment for innovation and job creation.

Startups remain central to India's economic growth, driving job creation, new products, and services. The introduction of these new measures is expected to further strengthen the sector, attracting more investment and fostering an environment conducive to innovation.