Introduction

Quoting Telugu poet and playwright Shri Gurajada Appa Rao’s famous saying, ‘A country is not just its soil; a country is its people’ the Hon’ble Finance Minister Ms. Nirmala Sitharaman presented the Union Budget 2025-26 with the theme “Sabka Vikas” stimulating balanced growth of all regions on February 1, 2025, to the country. During her speech the Hon’ble Finance Minister shed light on the four engines i.e., first being Agriculture, second being MSME, 3rd being Investment, and 4th being Exports are important in the country’s journey to reach its final destination “Viksit Bharat”. Out of these four engines, the third engine dealing with Investment focuses on Investing in people, economy, and innovation.1

The 3rd engine of Budget and Innovation2

By introducing investment as the 3rd engine of the Viksit Bharat journey the Hon’ble Finance Minister announced the following

Atal Tinkering Labs

Atal Tinkering Labs (ATL) is one the flagships initiatives under the Atal Innovation Mission (AIM) of the NITI Aayog. First envisioned in 20163 the Atal Innovation Mission endeavors to inculcate a culture of innovation and entrepreneurship across the nation by developing infrastructure across educational institutions where students are able to experiment with robotics, 3D printing and other technology, will also be set up to cultivate the spirit of curiosity and innovation, and foster a scientific temper among young minds. In continuation of the government’s commitment to cultivate one million children in India as neoteric innovators4 the finance minister in her recent 2025-26 budget announced setting up of 50,000 ATLs in government schools across the nation in next 5 years. With regards to the total budget allocated there has been a four-fold increase from the revised estimates of the current financial year. The Atal Innovation Mission, which sets up the labs, has been allocated ₹400 crore for 2025-26.5

Research, Development, and Innovation

The Government in furthering its vision of making India a powerhouse of cutting-edge innovation which will be fueling the goal of Viksit Bharat 2047, has in its budget of 2025-26 decided to allocate a corpus of ₹20,000 crore to implement its plans for private sector driven Research, Development, and Innovation. 6 This step is seen by many as a major step in developing Indias’R&D ecosystem as there has been a significant increase from the 2024-25 Budget Estimate of ₹2,819 crore and the Revised Estimate of ₹2,351 crore. The department of Science and Technology’s Vigyan Dhara scheme, which promotes scientific research and capacity building, has also seen an increase in budget allocation of ₹ 1,425 crore for 2025-26, compared to ₹330.75 crore in 2024-25.7 Further The Council of Scientific and Industrial Research has been allocated ₹6,600 crore for 2025-26, a marginal increase from the ₹ 6,303.45 crore in 2024-25. These steps by the government has been lauded by many commentators and are being seen as a major push to incentivize the private sector to invest and innovate more towards developing indigenous technology.8

Deep Tech Fund of Funds

Like many other schemes which saw a continued effort by the government over the past few years, the policy of nurturing next generation of startups to develop an ecosystem of cutting-edge research and strengthening India’s status as a global innovation hub has been given another major push in 2025-26 budget. This push comes in form of setting up of a corpus of ₹10,000 crore in form of a new deeptech-focused Fund of Funds Scheme (FFS). 9The DeepTech FoF proposed to be used to expand the scope of the Small Industries Development Bank of India (Sidbi) Fund of Funds for Startups (FFS) by allocating an additional Rs 10,000 crore in corpus to the scheme. With the fresh allocation, the scheme's total outlay is being estimated to reach a total of ₹ 20,000 crore.10 With this increase in investment corpus, India hopes is eyeing itself as a leader in the upcoming wave of technical advancements. Startups in their early stages will expand even faster as a result of Sidbi's FFS expansion, which will also guarantee that they have access to the funding they need to realize their full potential.11

PM Research Fellowship

Form focusing on inculcating scientific temperament and igniting inquisitively among young minds to tinker with next-gen tech, to nudging the entrepreneurial spirit of young Indians to innovate in India, the government has been consistent with is policy and in furtherance to its previous schemes the government decided to announce its ambitious PM Research Fellowship scheme in union budget 2025-26. The government aims to provide another 10,000 fellowships for technological research in IITs and IISc with enhanced financial support. 12 Launched in 2018-19 the Prime Minister’s Research Fellows (PMRF) Scheme offers direct admission to selected students in the Ph.D porgrammes in the Indian Institutes of Technology (IITs), Indian Institutes of Science Education and Research (IISERs) and Indian Institute of Science (IISc) with attractive fellowship of Rs.70,000/- to Rs.80,000/- per month.13 This initiative offers enhanced financial support for technological research projects. The scheme is expected to stimulate high-quality research and nurture a culture of innovation in premier institutions.

Gene Bank for Crops Germplasm

The government in a move to bolster agricultural productivity and future food security announced setting up of National Gene Bank. This announcement comes almost 3 decades after first such Gene Bank was established in the country. The establishment of a second such bank comprising a million germplasm lines will be set up for future food and nutritional security and provide conservation support to both public and private sectors for genetic resources. 14India's first gene bank was set up in 1996 by the Indian Council of Agricultural Research-National Bureau of Plant Genetic Resources (ICAR-NBPGR) in New Delhi. This bank is comprised of 12 regional stations across the country for collection and storage of vital crop germplasms. These germplasms are the genetic constituents of plants or animals that is used in research, conservation and crop breeding.15

National Geospatial Mission

In the Union Budget of 2025-26 the government launched its ambitious National Geospatial Mission. Geospatial refers to data or information that is associated with a specific location on the Earth’s surface. The mission will be aimed at modernizing land records and enhancing urban planning across India. This initiative will leverage the existing PM Gati Shakti framework to develop foundational geospatial infrastructure and data, facilitating improved design and execution of infrastructure projects.16 This mission aims to enhance foundational geospatial infrastructure and data, leveraging the PM Gati Shakti initiative, which was launched in 2021. In the long run government plans to consolidate all geospatial data for better planning and delivery of other welfare schemes. Although this is seen as a positive step there has been concerns regarding allocation of budget for this ambitious project. ₹100 Cr. has been announced by the government for this project which is seen by many to be too low.17

Gyan Bharatam Mission

In resent time there has been a huge uproar by many seeking a government scheme to safeguard and enhance India's vast intellectual heritage. In pursuance to such demands and in continuation of already ongoing government policies the government decided to launch another mission named Gyan Bharatam Mission. The objective of this mission is to conserve and document over 1 Cr. ancient manuscripts to ensure preservation of India’s ancient knowledge, the government envisions to collaborate with academic institutions, museums’, libraries and private collectors18 . In addition to the mission the government also announced plans to set up a national digital repository of Indian knowledge systems (IKS) for knowledge sharing, this is in furtherance to the already ongoing mission of the government to digitize all its records National Archives of India (NAI). 19 Furthermore the budget allocation for National Manuscripts Mission (NMM), whose aim is to identify and document manuscripts and make the manuscript heritage accessible across the country, has been hiked from Rs 3.5 crore to Rs 60 crore. These are seen as major positive steps for preservation of manuscripts by way of digitizing them all.20

Union Budget 2025-26 for Startups

As India’s startup ecosystem continues to grow and develop the innovative landscape of India. The government in its recent 2025-26 Union Budget has decided to give a big push for innovation and entrepreneurship with the objective to transform India into a hub for new technological advancements and business development. In continuation to its already lucrative schemes to support startups and young entrepreneurs to build business in India, the government has furthered its cause by rolling out several new schemes and adopted policies those will bolster the startup ecosystem in India. The government has tried to address all the major challenges faced by the startup ecosystem, including access to funding, regulatory hurdles and taxation. We will be looking into the key announcements made in the recent 2025-26 Union Budget which are specifically tailored for startups:

Credit Guarantee Scheme for Start-ups

To address he key challenge for the startups to access funds the government has had rolled out the scheme of Credit Guarantee Scheme for Startups (CGSS) in 2022 with the purpose to provide guarantee upto ₹10 crore against credit instruments extended by lenders to finance eligible startups. The scheme provides guarantee through the National Credit Guarantee Trustee Company (NCGTC) with no collateral and a nominal guarantee fee of 2% per annum against any disbursed or outstanding amount.21 In a move to enhance the credit availability for startups, the government announced an increase in guarantee cover from ₹10 crore to ₹20 crore; while reducing the guarantee fee to 1 per cent for loans in 27 focus sectors. The objective of the government has been clear throughout to ensure easy availability of credit for startups to build and innovate in India and this announcement can be seen an enhanced policy continuation.22

Fund of Funds Scheme

Similar to several schemes that have been receiving government’s attention in recent years, the plan to cultivate the startups to enhance India’s cutting-edge innovation capabilities with regards to next-gen technologies and bolster India's position as a global innovation hub has received a significant push in the 2025-26 budget. The government in light of its policy has announced setting up of a corpus of ₹10,000 crore through a new Fund of Funds Scheme (FFS) focused on deeptech. The first such scheme was launched by the Government in 2016 with a corpus of ₹ 10000 crore.23 With the fresh allocation, the scheme's total outlay is being estimated to reach a total of ₹ 20,000 crore. The proposed corpus aims to broaden the reach of the Small Industries Development Bank of India (Sidbi) Fund of Funds for Startups (FFS). The government aims to address the biggest challenge to starups to access funds by this step. 24

Tax Benefits

  • The government in order to address the growing discontent within the startup ecosystem with regards to the taxation policy, has in the Union Budget 2025-26 announced tax benefits for 5 more years i.e., startups which are incorporated before April 1, 2030. Previously, startups incorporated between April 1, 2016 and March 31, 2024 were eligible for tax benefits under the Startup India program. The budget 2024 extended this deadline to March 2025, before extending it again in the current Union Budget 2025-26. The benefits available to all startups who will be incorporated till April 1, 2030 includes a three-year tax holiday, exemption from long-term capital gains tax, and exemption from tax on investments. To avail the benefits, startups must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) and have annual turnover of over ₹ 100 crore, among other criteria.25
  • In order to boost ease of doing business for startups, the government has announced extending the benefit of tax exemption as provided u/s 80-IAC of the Income Tax Act, 1961 for startups for another period of five years. Hence, the benefit will be available to eligible start-ups incorporated before April 1, 2030. Under the benefits, it gives a 100% tax exemption on the incurred profits that the startup made in any three consecutive assessment years out of 10 years beginning from the year in which the eligible startup is incorporated.26 The government believes that this exemption will provide the Indian startup ecosystem with a much needed push, enabling them to retain more capital for growth and innovation. This move will not only attract more investment but also contribute to this government’s vision to make India a leader in next-gen technology.

Conclusion

These targeted investments and strategic initiatives signal a strong commitment to building a robust ecosystem for research, development, and innovation in India. From fostering cutting-edge technology through deep tech funding and research fellowships to securing our future food supply and preserving our rich cultural heritage, these measures lay the groundwork for 2047 Viksit Bharat.

Authors: Shilpi Saurav Sharan (Managing Associate) and Swayamsiddha Das (Associate Advocate)

 

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1 https://www.indiabudget.gov.in/doc/budget_speech.pdf
2 d AT 1
3 https://education.vikaspedia.in/viewcontent/education/policies-and-schemes/atal-innovation-mission?lgn=en
4 https://economictimes.indiatimes.com/tech/technology/union-budget-2025-50000-atal-tinkering-labs-will-be-set-up-in-next-five-years-fm/articleshow/117821179.cms
5 https://www.thehindu.com/business/budget/atal-tinkering-labs-ai-centre-of-excellence-for-education-in-budget/article69168514.ece
6 https://www.business-standard.com/budget/news/rs-20k-cr-for-research-ai-geospatial-initiatives-to-drive-r-d-industry-125020300273_1.html#:~:text=The%20Rs%2020%2C000%2Dcrore%20allocation,country%20needs%20more%2C%20industry%20players
7 https://www.downtoearth.org.in/science-technology/budget-2025-26-major-boost-to-scientific-research-with-rs-20000-crore-outlay
8  https://economictimes.indiatimes.com/news/economy/finance/utilise-rs-20000-crore-allocated-for-rd-dea-secretary-to-india-inc/articleshow/117893426.cms?UTM_Source=Google_Newsstand&UTM_Campaign=RSS_Feed&UTM_Medium=Referral
9 https://yourstory.com/2025/02/deeptech-fund-of-funds-to-be-set-up-to-nurture-next-generation-starups
10 https://www.moneycontrol.com/news/business/union-budget-2025-government-explores-launching-deeptech-fund-of-funds-12926732.html
11 https://www.convergenceindia.org/industry-news/startup/budget-2025-government-to-explore-deep-tech-fund-of-funds-expands-sidbi-fund-for-startups-119034/
12 https://www.outlookbusiness.com/budget/union-budget-2025-fm-announces-10000-rd-fellowships-for-iits-iisc
13 https://www.timesnownews.com/education/pm-research-fellowship-scheme-pmrf-benefits-eligibility-application-education-budget-2025-article-117820095
14 https://www.thehindubusinessline.com/economy/budget/seeds-of-change-food-security-with-high-yielding-seed-mission-and-gene-bank/article69168540.ece
15 https://www.downtoearth.org.in/agriculture/budget-2024-25-india-to-set-up-second-national-gene-bank-to-ensure-future-food-and-nutritional-security 
16 https://www.indiatoday.in/science/story/budget-2025-national-geospatial-mission-announced-to-modernise-land-records-2673253-2025-02-01
17 https://pune.news/space/indias-national-geospatial-mission-is-inr-100-cr-enough-for-transformation-299705/
18 https://swarajyamag.com/news-brief/new-gyan-bharatam-mission-to-safeguard-indias-ancient-knowledge-over-one-crore-manuscripts-to-be-documented-and-conserved
19 https://theprint.in/budget/govt-rolls-out-gyan-bharatam-mission-to-conserve-1-crore-manuscripts/2474962/
20 https://www.deccanherald.com/business/union-budget/union-budget-2025-two-ambitious-digital-projects-launched-to-conserve-manuscripts-3384633
21 https://www.hdfcbank.com/sme/msme-government-schemes/credit-guarantee-scheme-for-startups-cgss
22 https://www.financialexpress.com/budget/budget-2025-credit-guarantee-cover-for-msmes-startups-enhanced-customised-credit-card-for-micro-units-to-be-launched-3733652/
23 https://yourstory.com/2025/02/deeptech-fund-of-funds-to-be-set-up-to-nurture-next-generation-starups 
24 https://www.convergenceindia.org/industry-news/startup/budget-2025-government-to-explore-deep-tech-fund-of-funds-expands-sidbi-fund-for-startups-119034/
25 https://www.moneycontrol.com/budget/union-budget-2025-nirmala-sitharaman-extends-period-of-incorporation-for-startups-till-2030-article-12927053.html
26 https://blog.saginfotech.com/section-80iac-startups#