Budget 2025: Innovation push, tax sops —here’s what fintech players expect from FM Sitharaman on February 1

Unless you are living under a rock, you would be aware that Union Finance Minister Nirmala Sitharaman will announce Budget 2025 on February 1. From individual taxpayers to industry tycoons – each has their own set of expectations from the government. 

Some are waiting for tempting sops, while others only want clearer and more comprehensive tax provisions so that the tax net widens and there is higher compliance, lower litigation, and perhaps lower tax rates in the future.

It is noteworthy that FM Sitharaman is likely to introduce a new income tax law in the Budget session based on the comprehensive review of current legislation, which was enacted in 1961 and underwent a number of amendments every year. For more details, you may read this Livemint article.

Here, we list out the key expectations of players from the fintech sector.

Fintech, or financial technology, has grown by leaps and bounds in the country in the past few years. From the prevalence of digital lending to the spike in UPI transactions and the mushrooming of blockchain start-ups, fintech’s growth is nothing but awe-inspiring.

In December 2024, for instance, UPI transactions hit a whopping ₹23.25 lakh crore, an 8 per cent jump over the preceding month.

Key expectations of fintech players from Budget 2025:

I. Support to innovation

One of the key expectations of fintech players is that the government will promote innovation. Budget 2025 should support innovation and inclusion in the financial services space.

“The government can support fintechs in the budget by making dedicating pools of capital available for MSME lending. There is also room for liberalising taxation applicable to NBFCs,” Neeraj Gupta, MD of Branch International (India), said.

II. Scope of MSME credit scheme

Some also believe that the budget should open newer avenues for small and medium-size enterprises in the sector which can be done by expanding the scope and size of the current MSME credit scheme.

“Expanding the scope and size of the current MSME credit scheme & its corpus would help galvanise businesses that are often ignored by the traditional lenders. These thousands of young Indian businesses hold great growth potential but need timely and accessible capital infusion,” said Sankarsh Chanda, Founder and CEO of Savart, a firm that provides investment advisory services.

III. Tax-free slab up to ₹15 lakh

Another expectation relates to some relief in income tax, which is more or less a generic expectation from all taxpayers.

“As we approach the Union Budget 2025-26, it is crucial to address the evolving financial needs of individuals across income groups and life stages. First, providing tax relief, especially for the middle-income segment, is essential. A tax-free slab of up to ₹15 lakh would be a significant step towards enhancing disposable income and easing financial stress. Additionally, the 30 per cent tax bracket, which often burdens higher-income earners, should see reform to ensure fairness and inclusivity,” said Krishan Mishra, CEO, FPSB India.

IV. Definition of equity-oriented funds

Another industry insider we reached out to expects the definition of equity-oriented mutual funds to be expanded to include fund of funds.

“We hope the Budget broadens the definition of Equity-Oriented Funds (EOFs) to include Fund of Funds (FoFs) and increases the investment limit on international schemes, enabling diversification and global exposure,” said Atul Shinghal, Founder and CEO of Scripbox, a financial services company.

V. Taxation of ESOPs

The spokesperson of another fintech said the Budget 2025 should tweak taxation provisions to ensure that the ESOPs are taxed at the time of sale rather than the time when the stock options are exercised.

“Taxing ESOPs at the time of sale rather than exercise would not only mitigate the burden of double taxation, particularly for those in higher tax brackets but also encourage longer holding periods,” said Yashish Dahiya, Co-Founder and Chairman of PB Fintech.

“ESOPs are a critical tool for startups, enabling them to attract and retain top talent in a competitive market. This will, in turn, help fintech start-ups at a macro level as well, especially at a time when they need an improved funding inflow,” Dahiya noted.