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Finance Minister Nirmala Sitharaman has extended the tax holiday for startups by one year to March 2022. The capital gains exemption given to startups was also extended by a year. “In order to incentivise funding for startups, I propose to extend the capital gains exemption for investment in startups by one more year to March 31, 2022,” she said while presenting the first paperless Union Budget on Monday. The tax holiday and long term capital gains (LTCG) exemption are positive initiatives, but their impact remains limited to the Department for Promotion of Industry and Internal Trade (DPIIT)-recognised startups (tax break exemption), according to Bhaskar Majumdar, managing partner at Unicorn India Ventures. “The funding in the startup sector currently comes from foreign funds, so while LTCG will give boost to domestic money finding its way into the sector, the numbers still won’t match up to the scale where impact can be made. However, we can’t ignore the fact that the government has rolled out many positive initiatives outside the Budget like Rs 1,000 crore seed fund announced recently.”