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Anticipated Trends for Business Setup in Financial Year 2024-2025

In the dynamic landscape of global business, setting up a new entity requires careful consideration of emerging trends. In order to accelerate the growth of companies, there are several expectations from the upcoming budget on 1st February 2024. Expectations involve making regulations and the overall tax system simpler through the introduction of incentive schemes, intending to support the development and growth of various entities. These tax incentives and corporate tax rate reductions are not only anticipated to enhance earnings but also play a crucial role in stimulating investments. As we step into the Financial Year (FY) 2024-25, several key shifts are anticipated that can be introduced via the Interim budget 2024 which could significantly impact business setup in India. Below are several possible expectations that entrepreneurs and investors can expect from the Interim Budget 2024:


  1. Government Initiatives for Startups

Governments has played a significant role in enhancing and promoting startups in India. Entrepreneurs in India can look forward to continued support from the Government of India through providing tax initiatives. The start-ups which are incorporated on or after 1st April 2016 but before 1st April 2024 are eligible to avail of deduction under section 80 IAC. There are expectations that the government might prolong the incorporation period of start-ups from 1st April 2024 to 1st April 2026 to expand the deduction benefits to the newly established start-ups. Additionally, the duration for claiming deductions is expected to extend from 3 years to 5 years to encourage setting of new business in India.


  1. Government Initiatives for Manufacturing Entity

The newly established manufacturing domestic companies that are incorporated on or after 1st October 2019 but on or before 31st March 2024 are eligible to avail of the concessional rate of 15% subject to certain conditions. It is expected that the government may extend the incorporation period to the companies established from 31st March 2024 to 31st March 2026 to encourage setting up new businesses in India. This extension would also advance the goals of the 'Make in India' initiative by enhancing India's appeal for the establishment of new manufacturing units, primarily to stimulate exports.


  1. Widening the Scope of Section 115BAB

The current provisions of Section 115BAB offer a concessional tax rate of 15% exclusively to companies involved in manufacturing. To extend this benefit to a broader range of activities undertaken by manufacturing firms, such as ancillary trading or job work, it is expected that Section 115BAB(2)(b) would be amended.


  1. Tax Incentives for Women Entrepreneurs and Farmers in India

It is anticipated that more focus would be placed on providing various benefits to women entrepreneurs and poor farmers of India. In the upcoming Interim budget, it can be expected that various tax incentives can be provided to women entrepreneurs and poor farmers. It would encourage new company set ups in India by women entrepreneurs which would help in to raise the standard of living.


  1. Rise of Specialized Business Setup Service Providers

With an increase in use of AI-driven technology, increase use of electric vehicles, and other environment-friendly and time-saving process it can be expected that specialized service providers are expected to gain prominence. It can be expected to decrease GST rate for electronic vehicles, further incentives for investments in R&D for artificial intelligence and other deep technologies.


  1. SEZ Reform: Paving a New Course for Business in India

In the Union Budget 2023, the finance minister announced the phasing out of the Special Economic Zones Act (SEZ) in favour of new legislation, signalling changes in the landscape for establishing a business in India. The upcoming law aims to involve states in the development of Enterprise and Service Hubs. Unlike the current SEZ Act focused on international markets, the new legislation is expected to permit units for both domestic and international markets. As the government intends to bring the new legislation, additional insights are expected which would result in setting up new businesses in India.


The business setup landscape is evolving rapidly, presenting both challenges and opportunities for entrepreneurs. Embracing digital transformation, staying informed about regulatory changes, and incorporating sustainability into business strategies will be crucial. As the dynamics of work continue to shift, adapting to virtual collaboration and taking advantage of government initiatives for startups can set the stage for a successful business setup in 2024-2025. Entrepreneurs are encouraged to maintain flexibility, take proactive measures, and utilize the specialized knowledge of service providers to navigate the intricacies of initiating a new business in India.