Budget 2025: FM announces new ₹10,000 cr Fund of Funds for startups

While presenting Union Budget 2025-’26, Union Finance Minister Nirmala Sitharaman announced that a new Fund of Funds will be set up for start-ups with a fresh contribution of ₹10,000 crore. The earlier ₹10,000 crore Fund of Funds announced in 2016, disbursed through SIDBI, has contributed to over 140 Alternate Investment Funds (AIFs), supporting over 1,100 startups. SIDBI made ₹10,913 crore commitment till September 2024.

She also outlined a plan to offer loans between ₹10 crore-₹20 crore, with a reduced guarantee fee of 1%, in 27 sectors crucial for ‘Atmanirbhar Bharat.’

Industry has welcomed this additional funding which will be made available to AIFs for deployment in startups. Gopal Jain, managing partner & co-founder, Gaja Capital says, “The announcement of a ₹10,000 crore Fund of Funds with expanded scope and provision for a Deeptech Fund of Funds is a significant step toward strengthening domestic pools of capital for cutting-edge innovation. This has been a long-standing industry demand, and we are encouraged to see the government’s commitment to catalysing next-generation enterprises and startups in critical sectors."

Vivek Iyer, partner and Financial Services Risk Leader, Grant Thornton Bharat says “By supporting the entire innovation value chain, it ensures startups are not just funded but positioned for global leadership."

Siddarth Pai, founding partner, 3one4 Capital says that the Deep Tech Fund of Funds will provide capital needed for deep tech companies to scale in India. “If this is structured to provide long term capital support, this will be a huge boost to R&D in India, development of fundamental research and eventual commercialisation.”

The other concession relates to tax benefit of incorporation. The Finance Bill says “It is proposed to extend the benefit provided under Section 80-IAC to startups for another period of five years, i.e. the benefit will be available to eligible start-ups incorporated before 01.04.2030.” Under the existing provisions of Section 80-IAC, startups could claim 100% tax deductions for any three successive years. When the provision was introduced, the government had announced a cutoff date for incorporation from April 1, 2016, till April 1, 2025. Now this benefit has been extended to start-ups incorporated till April 1, 2030.