India’s IT sector seeks deep-tech fund, policy reforms in budget

NEW DELHI, INDIA — India’s leading IT industry body, Nasscom, has called for the establishment of a central deep-tech fund to support startups in emerging technologies.
As part of its recommendations for the Union Budget 2025-26, Nasscom proposed a fund-of-funds model with a 10-year gestation period and matching capital provisions to encourage venture investments. This aligns with the draft National DeepTech Startup Policy 2023, which also underscores the need for robust funding mechanisms.
The industry body further suggested a two-tiered grant framework to foster innovation in deep-tech. It proposed an initial Proof of Concept grant of ₹2 crore (US$231,000) to validate core technologies and a Prototype grant of ₹3 crore (US$347,000) to support commercialization.
Additionally, infrastructure grants for high-cost sectors like space, semiconductors, artificial intelligence, and clean energy were recommended.
Reforms in safe harbor rules for GCCs
Nasscom has advocated for changes in safe harbor rules to benefit global capability centers (GCCs), which primarily serve their parent companies. The organization urged the government to eliminate the turnover cap of ₹200 crore (US$2.31 million) and relax risk-bearing criteria under these rules.
“The safe harbor regime should be made available for all related party entities,” Nasscom stated, emphasizing that larger companies do not necessarily enjoy higher profit margins.
ESOP taxation reform tops wishlist
Taxation on Employee Stock Option Plans (ESOPs) is another key focus area. Currently, only 2.5% of Department for Promotion of Industry and Internal Trade (DPIIT)-registered startups benefit from deferred tax payment options.
Ashish Aggarwal, Vice President of Public Policy at Nasscom, argued that this benefit should be extended to all DPIIT-recognized startups. He also suggested safeguards to ensure ESOPs are uniformly offered to Indian resident taxpayers across all eligible employees.
Expanding SEZ reinvestment reserves
Nasscom has proposed expanding the scope of reinvestment reserves in special economic zones (SEZs) to include operational expenses such as leasing computers, cloud infrastructure costs, software purchases, and employee-related costs like salaries and training.
These changes aim to provide tech companies with greater flexibility in utilizing their reserves effectively.
Budget 2025: A crucial moment amid global challenges
The Union Budget 2025-26, scheduled for February 1, comes at a critical time for India’s IT export industry. Global economic uncertainties and geopolitical risks have intensified the need for supportive domestic policies.
By addressing deep-tech funding gaps, reforming safe harbor rules, expanding ESOP benefits, and broadening SEZ reserve utilization, Nasscom hopes to strengthen India’s position as a global tech leader while fostering innovation and growth in emerging sectors.