Budget 2025 wish list: Indian VCs eye deep-tech boost after angel tax relief

Artificial intelligence (AI) is no longer just a buzzword; it is poised to revolutionise global growth trajectories. As U.S. President Donald Trump unveils a $500 billion Stargate initiative to boost AI, Indian venture capitalists (VCs) are looking at the upcoming Union Budget 2025 to incentivise the deep-tech ecosystem.

Prashanth Prakash, Founding Partner at Accel India, hailed government programs like ‘Startup India’ and ‘Startup Mahakumbh’ for fostering innovation and establishing a robust foundation for sustainable growth. Speaking to Business Today, he emphasised, “With continued support, India is well-positioned to cement its role as a global hub for innovation and entrepreneurship.” He further noted that targeted incentives in high-impact sectors like deep tech could accelerate their development and position India as a global leader.

Deep tech, or deep technology, refers to advanced technologies driven by scientific and engineering breakthroughs. Across the venture capital ecosystem, the sentiment is clear: the government must introduce initiatives that pave the way for technological advancements.

Ankit Kedia, Founder and Lead Investor at Capital-A, stated, “Encouraging investments in deep tech through specific tax benefits can help position India as a leader in cutting-edge technologies like AI, robotics, and blockchain.”

Last year’s abolition of angel tax was a significant milestone for investors, easing a major hurdle in the start-up ecosystem. Shayam Menon, Partner at Bharat Innovation Fund, highlighted the need for further steps, saying, “Just as the angel tax removal reshaped investment strategies, similar moves could accelerate growth in deep-tech sectors.” He also advocated for enhanced tax benefits and the introduction of a ‘Fund of Funds’ initiative.

Beyond deep tech, climate tech and agritech have emerged as sectors of promise. Brijesh Damodaran, Managing Partner at Auxano Capital, underscored the transformative potential of agritech in driving economic growth, enhancing food security, and empowering rural communities. “Tax incentives could include revisiting GST rates on agritech solutions like AI-based farm monitoring systems, smart irrigation tools, and precision agriculture equipment,” he suggested. He also called for preferential tax treatment for start-ups focussed on sustainability and digital agriculture, alongside promoting public-private partnerships (PPPs) to deploy agritech innovations in underserved areas.

Kedia echoed similar sentiments for climate tech, emphasising the need for tax incentives to foster innovation in renewable energy solutions and sustainable practices, aligning with global sustainability objectives.

Meanwhile, manufacturing, infrastructure, and healthcare also demand a strategic push, according to Dipanjan Basu, Co-founder and Partner at Fireside Ventures. “The Budget should focus on increasing employment and wage bill expansion for the middle income which should include increased and focussed investments in manufacturing, infrastructure, and healthcare to increase employment and more income for the middle class. This is critical for driving consumption which is the bedrock of our economy,” he asserted.

With the Union Budget 2025 just days away, the venture capital community remains hopeful that the government will announce bold measures to bolster India’s start-up ecosystem and catalyse growth across key sectors.