As the Union Budget 2024-25 nears, Zerodha Co-Founder and CEO Nithin Kamath has shared his insights on fostering entrepreneurship across India's small towns and villages by making startup investments more accessible. 

Kamath emphasized the importance of encouraging entrepreneurship beyond urban centers, noting that venture capitalists rarely venture into smaller regions. “Wealthy individuals in these areas are the best hope for fostering local startups”, Kamath stated on the social media platform X.

One key proposal Kamath highlighted is the modification of Section 54F of the Income Tax Act. Currently, this section provides tax exemptions on capital gains from the sale of any asset if the proceeds are reinvested in residential property. Kamath suggested extending these exemptions to include investments in startups, arguing that this change could make startup investing mainstream.

“Although there might be minor risks of misuse, the potential benefits far outweigh them”, Kamath added.

As per the last Union Budget, Section 54F allows for tax exemptions on long-term asset sales up to Rs 10 crore, provided the proceeds are reinvested in residential property. Kamath's proposal to extend these benefits to startup investments aims to channel more capital into the entrepreneurial ecosystem, particularly in underrepresented areas.

The upcoming Union Budget presents an opportunity to implement such measures, potentially transforming India's startup landscape and driving economic growth in smaller towns and villages.