Budget Expectations Of Fintech Industry In India
The sector has adapted highly to digitisation, and hence, they expect a change in accordance to cater for their growth.
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The fintech industry is becoming more prominent in India during the pandemic. According to the Reserve Bank of India, the sector reached $4.6 billion in investments in 2021, tripling the amount achieved in 2020. Thus, the fintech industry is playing a considerable role in the country's economy. As the union budget meeting is approaching, finance companies are quickly putting forth their expectations from the government of India. The meeting will be introduced by Finance Minister of India, Nirmala Sitharaman, on February 1, 2022, and fintech firms anticipate that she will liberalise the tax system for finance startups. Furthermore, the sector has adapted highly to digitisation, and hence, they expect a change in accordance to cater for their growth.
Tax relief scheme
One of the highly requested changes the fintech sector seeks from the GOI is tax relief. If the demand is accepted in the budget meeting, it will help strengthen the financial inclusion of MSMEs. The firm is expecting an introduction of incentives like a tax break for all merchants accepting digital payments. For example, when a retailer or merchant makes sales through digital payment, 75% of the total sale (cash or digital) should become liable for a lower income tax rate. These benefits will attract more sellers to adopt digital payment processes. Furthermore, this scheme will help smaller businesses financially under the formal tax system.
New policies to nurture the fintech ecosystem
In the last two years, pandemics brought new-age technologies and innovative ideas for startups, and the trend will continue in 2022. In response to this, finance and tech firms expect union budget meetings to decide on new reforms, regulations and policies that will offer tax relief to MSMEs and the startup ecosystem altogether. Digital payment has become the new normal. Hence, the government is required to focus more on developing digital infrastructure such as cooperative banks across different states of India. This will enhance the customer experience and facilitate the growth of finance startups in 2022-2023.
Promoting finance education
The government of India has constantly put forward new programs like digital India to normalise the digital finance industry. This has laid the groundwork for citizens, but educating them about offline and online finance operations will help fintech excessively. Therefore, the budget shall contribute towards the digitalisation of the unbanked ruler part of the country and provide personal finance education to those unaware of its benefits. This can effectively boost financial literacy in India. Such practices should be supported and funded by the government across the country. Moreover, the capitalisation of technologies such as UPI is expected to encourage the new entrepreneur to invest in R&D while offering tax benefits, and incentives will further promote them towards innovation.
Revision of Tax Regime
The finance ministry is expected to reconsider the personal income tax slab in the 2022-2023 session as several consider that two tax regimes are confusing for the average working class. In this case, the government can increase the highest tax slab from 15 lakh to 20 lakh, or they may
reduce it to make the new regime more appealing. This will be highly helpful to the income class because 2021 did not relieve them.
Funding for 2022-2023 Session
As digital platforms are rising in the financial tech sector, funding becomes necessary. Many fintech businesses are seeking this from the budget meeting. Like last year, the GOI allocated Rs 1,500 crores to the finance branch to elevate the finance sector and boost online payment trends. This year the expectation continuous since the digital payments has increased even more. With suitable investments funds, the fintech industry can expand excessively, boosting the country's GDP and employment rate.
Incentives new users for UPI
The massive digitalisation of the world has impacted several industries leading them to grow in unexpected ways. The financial sector recently became a part of it when smartphones and the internet increased tremendously. Fintech has become an unavoidable part of users' lives, primarily through the UPI apps in a cashless world. Out of 118 crore mobile subscribers in India, 20 crores use digital payment through UPI. This consistent growth of users has shown the establishment of the virtual payment business. So it is feasible that the government should focus on incentivising new users, with Jan Dhan Accounts and low, middle-class income to benefit from UPI. Supporting financial expenses for Feature phones and USSD based payments will help relieve the operational cost of technology will make the UPI transactions more accessible to every corner of India.
To conclude, the 2022 Union Meeting is expected to simplify KYC guidelines to increase financial inclusion, GST regulations, specific SOP's for MSMEs and affiliated businesses, etc. Any critical decision for the fintech industry will directly impact the productivity of the entire startup ecosystem. This has the potential to make or break a country's GDP. Therefore, it is vital that the government addresses the necessary support for the finance startups and takes initiatives to make the industry quickly grow.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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