Union Budget 2025: What It Brings for Startups & MSMEs?

The Union Budget 2025 has big things in store for startups and MSMEs, focusing on better funding access and tax breaks to fuel growth. Here’s how these changes can help your business thrive!

For startup founders, the Union Budget is a make-or-break moment that can open doors or add new hurdles. Every year, we wait to see if there will be tax breaks, better funding opportunities, or policies that make life easier (or harder).

With 2025 shaping up to be a big year for Indian startups,

• Will this budget bring relief on taxation?

• Will fundraising get simpler?

• Will regulations finally align with the fast-paced startup world?

Startups look to the Union Budget for policies that ease:

• Funding – Better access to capital, simplified angel tax, and more government-backed funding.

• Taxation – Lower corporate taxes, easier GST compliance, and broader tax holiday eligibility.

• Regulations – Streamlined company registration, flexible labour laws, and faster patent processing.

• Growth Support – Incentives for deep tech, AI, and exports, plus stronger digital infrastructure.

This article breaks down what the budget could mean for founders and how it might impact the startup journey ahead.

The Startup Landscape in 2025

Before we dive into the Union Budget, let’s take a step back and look at where India’s startup ecosystem stands today—and why, this time around, entrepreneurs and investors are more eager than ever to see what the budget has in store for them.

Image Source: Key Features of Budget 2025-2026, Ministry of Finance Budget division

India’s startup ecosystem operates alongside a vast network of Micro, Small, and Medium Enterprises (MSMEs), which play a crucial role in driving economic growth. As of December 2024, 5.7 crore MSMEs have registered on the Udyam Portal & Udyam Assist Platform. Together, these MSMEs provide employment to 24.14 Crore people across India.

And, this number of MSMEs is also expected to increase to 7.5 crore and become an even bigger driver of economic growth, employment, and innovation. Many startups either emerge from MSMEs or collaborate with them, leveraging technology to enhance productivity and expand market reach. (IBEF, March 2024)

However, countless other startups operate outside this framework, often struggling with access to funding, regulatory compliance, and market visibility.

Image Source: Startup India’s 9-year Factbook “Prabhaav”

Key Highlights of Union Budget 2025 for Startups & MSMEs

Budget 2025-26 brings some significant wins for startup founders, making it easier to raise funds, scale operations, and navigate compliance.

This year’s budget focuses on removing key roadblocks and creating new opportunities, particularly for startups in AI, fintech, MSMEs, and export-driven sectors.

1. Tax Benefits & Funding Support

🟡 80-IAC Tax Exemption Extension

A major win for startups, the government has extended the 100% tax exemption under Section 80-IAC for three out of ten years. This benefit, which was previously available to startups incorporated before April 1, 2025, has now been extended by 5 more years- covering startups launched before April 1, 2030.

With over 150,000 DPIIT-registered startups in India, this move provides much-needed relief, especially for early-stage ventures.

🟡 Doubling of Credit Guarantee for Startups

Access to credit remains a major challenge for early-stage startups. To address this, the government has doubled the Credit Guarantee Scheme limit from ₹10 Crore to ₹20 Crore, making it easier to secure loans.

Image Source: Key Features of Budget 2025-2026, Ministry of Finance Budget division

19.90 Lakh guarantees have been approved amounting to Rs. 2.44 lakh Crore during the period January 1 to December 31, 2024. (IBEF, 2024)

🟡 First-Time Entrepreneur Loan Scheme

For aspiring entrepreneurs, a new First-Time Entrepreneur Loan Scheme has been introduced, offering loans of up to ₹2 crore per startup. This initiative targets 5 Lakh new entrepreneurs over the next five years, with a special focus on tier-2 and tier-3 cities.

The scheme is also expected to boost women-led and SC/ST-founded startups, which currently make up less than 15% of DPIIT-recognised ventures.

🟡 Another 10,000 Crore Fund of Funds

Alternate Investment Funds (AIFs) backing startups have already secured commitments of over ₹91,000 crore, supported by the government's ₹10,000 crore Fund of Funds.

Now, the government is stepping it up with a new Fund of Funds, adding another ₹10,000 Crore, expanding its scope to fuel even more startup growth.

2. MSME & Sector-Specific Growth

🟡 MSME Investment & Turnover Limits Increased

Recognising the crucial role of MSMEs in the economy, the government has increased investment and turnover limits, allowing over 5.7 crore MSMEs to scale their businesses without losing MSME benefits.

Image Source: Key Features of Budget 2025-2026, Ministry of Finance Budget division

This move is expected to help millions of small businesses expand without worrying about crossing outdated thresholds.

🟡 Credit Cards for Micro Enterprises

If you run a small startup or microenterprise, you can now apply for a special business credit card with a limit of ₹5 Lakh, provided you are registered on the Udyam portal.

This provides easy access to working capital without the hassle of traditional loans. In the first year, 10 Lakh such cards will be issued.

🟡 Export Incentives & BharatTradeNet Platform

India’s export-driven startups, especially in D2C, SaaS, and manufacturing, stand to benefit from new export incentives and the BharatTradeNet platform.

The government is launching an Export Promotion Mission with support from the Commerce, MSME, and Finance Ministries. This initiative will help businesses set export goals, access easier credit, get support for cross-border trade, and overcome global market challenges.

A new digital platform, BharatTradeNet (BTN), will help with trade paperwork and financing for global businesses. It will work alongside other logistics tools and follow international standards, making things easier for startups.

India's exports hit a record $778.21 billion in 2023-24, showcasing the country's growing strength in global trade. This rise is driven by strong growth in both goods and services exports.

🟡 ₹500 Cr AI & Deep-Tech Research Fund

With AI expected to increase global GDP by $7 trillion or 7% over 10 years (Goldman Sachs Report), the government is investing ₹ $500 Crore in AI and deep-tech research. This fund will help early-stage AI startups, R&D initiatives, and talent development in cutting-edge technologies.

🟡 Skill Centres for Youth

To make India a global manufacturing powerhouse, the Budget 2025-26 is setting up 5 National Centres of Excellence for Skilling.

In partnership with global experts, these centres will help equip young talent with the skills needed to build world-class products- supporting the vision of ‘Make for India, Make for the World.’

🟡 Manufacturing Centres for SMEs

The government is launching a National Manufacturing Mission to support small, medium, and large industries. This initiative will provide policy support, execution roadmaps, and a governance framework to help businesses scale and boost domestic manufacturing.

3. Compliance & Ease of Doing Business

🟡 Revamped Central KYC

The Centre has proposed data protection measures regarding Central Know Your Customer (CKYC), such as Aadhaar, PAN card, Voter ID, and driving licenses.

🟡 Higher TDS Exemptions

Tax compliance is often a burden for startups and investors. To ease this, the budget introduces higher TDS exemptions on interest and dividends, reducing the tax burden for angel investors and early-stage VCs. The TDS exemption limit for interest and dividend income has been increased to ₹10,000.

This will make startup investments more attractive, particularly for retail investors.

🟡 Faster M&A Approvals

Mergers and acquisitions (M&A) are crucial for startup exits. With India's startup M&A deals surging every quarter, the government is now streamlining approval processes to help 500+ startups that go through acquisitions annually.

This move will speed up exits, attract more investors, and encourage startup consolidations.

🟡 Startup IPOs & Fundraising Support

India’s startup ecosystem is maturing rapidly, with over 118 unicorns valued at $1 billion+ each, spanning fintech, eCommerce, SaaS, and deep tech. As these companies scale, many are eyeing public listings as their next big move.

To make IPOs more accessible, the government has introduced IFSC (International Financial Services Centre) tax relaxations, allowing startups to explore international fundraising and foreign institutional investments with fewer tax hurdles.

For everyday investors, the Budget 2025-26 now allows retail schemes and Exchange-Traded Funds (ETFs) to move into IFSCs without extra taxes. Previously, only certain funds had this benefit, but now anyone can transfer their investments to IFSC without tax worries, making it a more appealing option for global investments and better opportunities!

What Does This Mean for India’s Startup Ecosystem?

• 1,00,000+ startups will benefit from tax holidays, better funding access, and easier compliance.

• AI, fintech, and logistics startups will see increased investment & government support.

• Export-focused and MSME startups will get easier global market access & funding boosts.

• Regulatory simplifications will make starting, running, and scaling a business much smoother.

• The government is heavily investing in infrastructure, which means more opportunities for startups in logistics, fintech, and clean energy.

Here’s the detailed Budget Speech PDF, in case you’re interested in taking a closer look and diving into how the budget unfolds.

https://www.indiabudget.gov.in/doc/budget_speech.pdf

The Union Budget 2025 introduces many key benefits for startups. But as every founder knows, government policies can open doors, not walk through them for you. The real challenge now is execution- how startups can leverage these incentives to scale faster, attract investors, and expand globally.

For now, one thing is clear- India’s startup ecosystem has never been more in focus, and the road ahead looks promising!

At Razorpay Rize, we get it—building a startup is tough. That’s why we’re more than just a space for connecting with other founders. We’ve got programs, tools, and services designed to take some of the weight off the shoulders and make the journey just a little bit easier.

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