The fintech sector has asked FM Nirmala Sitharaman to also liberalise the tax system for financial sector startups in the upcoming Budget, arguing that it has enormous potential to promote financial inclusion and create massive job opportunities.
The Union Budget 2022-23 will be introduced by Finance Minister Nirmala Sitharaman during the budget session of Parliament on February 1, 2022. The budget plan is highly anticipated, particularly this year with the Omicron variation of COVID-19 causing the third wave of the pandemic in the country.
The fintech sector has asked FM Nirmala Sitharaman to also liberalise the tax system for financial sector startups in the upcoming Budget, arguing that it has enormous potential to promote financial inclusion and create massive job opportunities.
Here’s what the fintech sector is expecting from the budget:
Arun Nayyar, Chief Executive Officer, NeoGrowth Credit Pvt Ltd
“In the upcoming Union Budget 2022-23, we expect to see initiatives that would further strengthen the financial inclusion of MSMEs in India and encourage digitisation. With the third wave upon us, we expect to see an extension on priority sector lending to NBFCs by banks extending credit to underserved and unserved MSME segments. To boost the adoption of digital payments by the MSME sector, we would like to see the introduction of incentives such as tax breaks for merchants who adopt digital payments. For instance: A scheme under which a retailer with digital sales above 75% of all the sales, cash and digital, should incur a lower rate of income tax to accelerate/encourage digital payment adoption. This scheme would help in financial inclusion of small businesses under the formal tax system and help formalize the business transactions.”
Mitesh L Thakker, Founder & CEO, MissCallPay
“UPI as a revolution from India, has reached only 20 Crore users of 118 Crore mobile subscribers in India, Government should incentivize new users, primarily the Low Middle Income and Jan Dhan Account holders who on-board on UPI for the First time, also provide incentives to Fintech’s into Feature Phone, Voice & USSD based payments space to help absorb operational cost of technology so that UPI revolution reach into nook and corners of Bharat.”
Zafar Imam, CEO, FinShell.
“Technological and Digital disruption has impacted and led to the growth of all industries – the financial sector is at the top of that list. With the growing smartphone users and internet penetration, FinTech has become an invaluable part of each user’s life. The increasing users of digital financial platforms have brought in strong competition in the financial services industry. It goes without saying that with the access and usage of financial platforms online, the benefit has reached users irrespective of geographies, time and socio-economic boundaries. The consistent growth in the number of UPI users showcases and establishes the digital penetration in the payments business. There is also a significant growth in the investments and insurance sectors that has been led by this enhancing digital footprint.”
At this time, with this growth, it is important for us as part of the larger industry to support and enable digital finances and its infrastructure to make each user’s life easier and smoother.
Sanjay Sharma, MD – Aye Finance
“The repeated wave of the covid pandemic has caused commerce to get into a stop-start stop uncertainty. Micro and small enterprises are struggling as their buyers are fearful of spending their meagre savings. Over 95% of businesses in India are micro-scale businesses and these have been an important driver of the growth of our economy. These can also become a big drag on the recovery if the situation does not change.
The situation, fortunately, can be reversed speedily. The consumer sentiment at the bottom of the pyramid population is sombre and the government cannot leave it to normal market dynamics to pull up the animal spirits. The government is doing some and has to do even more to break this inertia.
Firstly, we need to ensure that micro-enterprises stay funded to survive. The Government should consider extending and expanding the ECLGS program for the better part of the new FY. It is important that rates of interest in these schemes should not be capped so that lenders are encouraged to make these funds flow to the micro-scale businesses where their operating costs are high. Capping the rate of interest diverts most of these funds to the bigger enterprises and thus starves the neediest micro businesses. Loan restructure program has been the life support for so many micro-businesses that have been established by years of toil by the business owner. We are not yet out of the woods and the lenders should hence be allowed to extend the restructuring window by 6-12 more months, to enable these businesses to pull through this trough.
Secondly, we need to jump-start the demand. Improving the opportunities for employment especially in tier2 and tier3 towns has become vital after the huge migration of workers from the cities. Government should place fiscal discipline as a lower priority and open its purse strings to employment generation schemes. Expansion and speedy transfer of wages through MNREGA and increase of infrastructure building projects is something the Government is already doing. Some economists have suggested the direct transfer of money in the hands of the families at the bottom of the pyramid. This is surely something that the Government should consider seriously. This can oil our commerce engine, lift the sentiments and get the demand back to normal times.”
Anil Pinapala, CEO & Co-Founder of Vivifi India Finance
“In the upcoming union budget, I hope to see a strong mandate for financial inclusion and assistance from the GoI for start-ups attempting to bring in credit for all transcending language, literacy, location, livelihood like FlexPay. Relaxation in norms and assistance with liquidity to lending NBFC fintechs who are attempting to offer credit to the under-served and unserved would be a welcome move. I also hope that non-prime lending could be brought under priority sector so that NBFCs can truly work to bring credit to all”
Anuj Khosla, Chief Executive Officer – Digital Business, Hitachi Payment Services
“The Budget 2022 should incentivise the MSME sector to adopt digital payments progressively. The digital payment ecosystem can unlock value for MSMEs by helping them expand their customer base, improving cash flows through the faster realization of funds, providing upsell opportunities, reducing costs and creating a digital footprint that would enable easy access to credit at cheaper rates. With the impact of the pandemic and the shift towards online purchases and adoption of digital payment modes by consumers, MSMEs need to be adequately equipped to cater to changing customer needs and behaviour while enabling them to thrive in an evolving digital landscape”
Amit Nigam, COO & Executive Director at BANKIT
“Nowadays, people are looking for more convenient banking services. As intriguing as it is, Start-ups and FinTech industry is quite handy to the public. Those who have comprehended the accelerated needs of not only the unbanked population but also of the underbanked population hold the brightest of future in the FinTech industry. The expected outcome of the efforts of FinTech industries is to make people rely on uncomplicated, safe, and one-stop-solution services. FinTech industry is based on technology and innovation. With a huge investment on IT infrastructure and manpower, we are expecting tax relaxations on these investments.”
Kundan Shahi, Founder & CEO of LegalPay
“Insolvency and Bankruptcy Code has been one of the key revolutionary m8oment during the last decade akin to the UPI moment for the fintech industry. However, given the pandemic and distress in the insolvency domain, the code needs further refinements and amendments for quicker and effective resolution to re-start the economic machinery. The Insolvency Law Committee has also proposed certain critical changes to the Code such as timelines for approval of resolution plans, closure of the voluntary liquidation process, continuation of avoidance transaction proceedings, etc. However, the authorities must also focus on additional challenges that affect majority of the CIRPs such as CIRPs being cash starved leading to inordinate delays. There is also lack of clarity on the position of the Interim Financier as to what information the financier is privy to and clear cut guidelines for institutions lending in this space. In addition, a framework for fast-track disposal of litigations for timely completion of the CIRP process is also the need of the hour. Furthermore, India’s remarkable step towards setting up bad-banks and detailed guidelines for the quicker resolution and cleanup of balance sheet of financial institutions is also something we expect out of the Budget.”
Vivek Banka– Founding Team @GoalTeller
“As the old adage goes “ No News is Good News” . As a startup founder, I think there are a lot of tailwinds that are existent in terms of ample liquidity, regulatory changes and broad based digital adoption. Other benefits have also been passed in over last many years for startups and small businesses and hence my expectations towards this years budget is status quo which in itself would bode well for everyone in the ecosystem. Whether it be personal taxes, corporate taxes or capital gain taxes the regime should be made easier and progressively lower as the government has themselves stated earlier. Focus we believe should continue to remain on more transparency, greater compliance and finally easier rules of doing business ( whether it be relaxed norms or government portals working smoothly every single thing that helps empower startups with easier processes eventually helps us save time and money.”
Kumar Abhishek, Founder and CEO, ToneTag
“The government has consistently driven programs like Digital India, which hascatalyzeddigital penetration and financial inclusion. With the groundwork prepared, information and education about digital payments, both online and offline, must be encouraged proactively across all geographies of the country.
We are hopeful that the upcoming budget will focus on bolstering the digital infrastructure of cooperative banks across the country and initiate reforms that drive digital financial inclusion.
It is also crucial to capitalize on the success of homegrown technologies such as the UPI and encourage tech startups to invest in R&D and explore avenues to leverage existing tech and create new products. We are hopeful that the upcoming budget will consider offering tax benefits and incentives; thus encouraging innovation.”
Jitin Bhasin, Founder & CEO- SaveIN
“Startups have a significant role to play in strengthening the healthcare ecosystem across the country. 70% of expense towards healthcare is borne out of pocket and penetration of health insurance is less than 1%. The government should consider additional sops for individuals allowing them to spend on preventive healthcare, insurance, personal fitness and also consider special tax concessions for startups focused on the healthcare sector. A healthy India will have a direct impact on overall productivity of the workforce and hence a boost for country’s GDP”
Shams Tabrej, Financial Expert and Founder Ezeepay
“With the growing demand for digitalization and platforms, it becomes important to take care of the funding in this area too. Last year, the government of India allocated Rs 1,500 crore to our sector to boost online payments and take fintech to another level. We hope even this year the government shows us the support and helps us do better. With the right funding and investment, we would be able to make the process easy for users and also generate employment in the country too.”, Said Mr. Shams Tabrej, Financial Expert and Founder Ezeepay.”
Alok Mittal, Co-Founder & CEO, Indifi Technologies
“In response to the economic hardship created by COVID-19, several liquidity measures to support the MSMEs were announced. However while the headline schemes were attractive the fine print made it very difficult for the new age fintech NBFCs to take advantage of the schemes. Due to such constraints the expected benefits of these support schemes did not reach/ transmit to the bottom of the pyramid MSMEs mostly catered to by fintechs/ small NBFCs. This budget must be in pursuit of better implementation of the schemes already in place. Further, the fiscal budget should announce measures to incentivize and strengthen support from SIDBI-like institutions and PSB’s towards lending to smaller NBFCs to ensure credit to SMEs at lower cost of capital.”
Amit Damani, Founder, Credit Fair
“The government needs to play a fine balancing act between spurring economic growth while consolidating its finances. We expect Credit Fair’s focus sectors of Healthcare, Housing and Education to get policy support from the government as they’re key toimproveour social infrastructure as well as for job creation. The LIC IPO and other measures to raise revenues will be crucial for the government. We hope it’s a fiscally responsible budget since inflation has been rising and that could lead to higher interest rates which would be a headwind for fintechs. Subdued interest rates especially in Government bonds and Fixed deposits will be needed to spur capex, SMEs and fintech lending. As a creator of Alternative Assets we hope the Budget will nudge individuals to diversify their portfolio and enable pension funds to invest in a wider range of fixed income or equity assets that have been created by fintechs.”
Tarun Nazare, Co-founder and CEO, Neokred (Fintech startupp)
– Financial wellness as a syllabus and program in the education sector.
– Private-sector lending: Banks and Merchants working together to facilitate 100% loan coverage to farmers in helping them get fertilizers and seeds as per their crop grown on their land.
– Importance is given to solar energy, creating Gigafactories PAN India which will decrease electricity cost by 70% in a year and in the 2nd year it’ll make it 100%. Hence, there will not be any electricity cost incurred by any citizen.
– Mandatory life and medical insurance facilitated to all bank account holders.
Shashank Udupa- Financial Expert, Co-founder and CFO, Scenes by Avalon (Tech and Finance)
“We have seen a massive adoption of technology disrupting the fintech space, especially in the Banking sector. The budget should focus on using this technology and try to penetrate unbanked rural India. There should also be a focus on Personal finance education in the country and any efforts to boost financial literacy in India will be great for the new generation”
Neha Nagar- CEO & Founder of TaxationHelp.in and Finfluencer (Finance, Crypto and Tax)
– As we know, the Indian government is not opposed to cryptocurrencies, therefore there will be tight restrictions and we may see some regulations on the regulatory front.
– On the tax front, there should be a change in the transaction fees.
– Another cutting-edge technology that might serve as the foundation for future fintech business concepts is blockchain technology.
– I assume that Budget 2022 will deliver much-anticipated tax relief for middle-income people through improvements in personal income tax to boost consumption.
– I also expect that Budget 2022 would include changes such as GST reduction, simplifying KYC rules to increase financial inclusion, specific SOPs for agricultural and affiliated businesses, land reforms, micro-housing development, and rural town development.
Anil Pinapala, CEO & Co-Founder of Vivifi India Finance
“In the upcoming union budget, I hope to see a strong mandate for financial inclusion and assistance from the GoI for start-ups attempting to bring in credit for all transcending language, literacy, location, livelihood like FlexPay. Relaxation in norms and assistance with liquidity to lending NBFC fintechs who are attempting to offer credit to the under-served and unserved would be a welcome move. I also hope that non-prime lending could be brought under priority sector so that NBFCs can truly work to bring credit to all.”
Source: Business World
