The Finance Ministry met several market shareholders last week for the pre-budget meetings. The ministry also met several fintech industry leaders and other experts to get their views. After the meeting, the fintech leaders expect some major changes to be implemented by the Ministry in the upcoming budget. Zee Business reached out to some of the leading fintech firms including those who were part of the pre-budget meeting to get a sense of expectations of the fintech industry from the upcoming budget.  

Here are the five major expectations of the industry from the upcoming Union budget:

1. Liberalization of tax regime

Corporate Income Tax rates are applicable to Domestic Fintech Companies. Services provided by Fintech companies which are enlisted in Section 65(12) of the Finance Act, 1994 are levied GST at the rate of 18 per cent. “We expect some reduction in startup taxes across the board with No GST until Rs 10 crore turnover annually. This will help SMEs build a stronger economy and aid more jobs,” said Ashwin Chawwla, Founder & Managing Director, Escrowpay, an open architecture digital payments platform.  
They expect Finance Ministry to look at providing benefits in terms of additional depreciation on the fixed assets that are being used by the Fintech Companies so that that will help save taxes for the companies. “Government can also look at providing flat deductions (similar to deductions provided u/s. 80-IA/ 80-IC of the Act) to all the SME & small business (depending on the turnover) so as to boost the overall Fintech Sector,” added Anita Basrur, Partner, Direct Tax, Sudith K Parekh &Co LLP.  

2.    Bringing some change in FLDG model

FLDG or ‘first loan default guarantee’ is a sort of arrangement between a fintech company and regulated entity (RE), including banks and non-banking finance companies, where the fintech companies need to compensate the RE in case a borrower defaults. “Whether FLDG should be in place or not, the issue is under examination with the Reserve Bank of India (RBI). There should be skin in the game for the fintech partner also. We have suggested some risk mitigation measures so that such partnerships are not detrimental to the consumers,” said Soumee Bhatt, General Counsel at BankBazaar.  

3.       Better financial inclusion

The fintech sector expects more assistance from the government for better partnerships with the banks to strengthen the existing model. But there also needs to be a level playing field for both the online and offline lenders, stressed the industry experts. “RBI can have proper regulation in place which can govern the Fintech Sector. This will bring more clarity for the companies operating in fintech sector and surely go a long way in regulating it. The growth of fintech could happen if digitization happens across India including rural areas,” added Basrur.

4.       Regulations for gold loan disbursal

The companies expect the government to take measures that would encourage partnerships between banks and gold loan companies to help make gold loans accessible to underserved communities in Bharat. To further meet the credit demands of consumers and the working capital needs of business owners, the budget may introduce steps to ensure adequate liquidity for the organized gold loan segment. “With adequate capital, gold loan companies can leverage technology to smoothen the process, broaden their customer base, increase market penetration, and enhance their online gold lending service capabilities,” said Anuj Arora, Co-Founder and COO, SahiBandhu, a digital lending platform.

5.       Relaxation in the ESOP criteria

Major tax reliefs were given to start-up employees in the previous budget to resolve the dual taxation and relief the tax burden that Employee stock ownership (ESOPs) have on employees. “There is a very stringent qualification criterion that is prescribed so only a very limited number of young Indian companies could reap the benefits of this welcome move. So industry recommends that the government extends this benefit to a wider set of young companies by relaxing the criteria,” said Bhatt of BankBazaar.