Deep Tech Startups, VCs Seek Tax Incentives, Regulatory Clarity

A number of deep tech and semiconductor startups, along with venture capital firms, on Thursday interacted with Commerce and Industry Minister Piyush Goyal to discuss measures to strengthen the innovation ecosystem, including tax incentives, and extended Startup India benefits, an official statement said on Friday.

Goyal said the government remains committed to strengthening India's DeepTech ecosystem, enhancing ease of doing business, reducing compliance burden, and promoting innovation and entrepreneurship.

Over 35 DeepTech and semiconductor startups and over 30 leading venture capital firms interacted with the minister at a roundtable in Bengaluru.

"Key issues highlighted during the interaction included the need to extend Startup India recognition benefits for DeepTech ventures beyond the current 10-year limit, improve clarity around grant accounting and FCRA ( Foreign Contribution Regulation Act) related rules for R&D funding, and introduce targeted tax incentives to encourage private investment in innovation," the commerce and industry ministry said.

Participants also emphasised the need for flexibility in fund regulations and reforms in DSIR (Department of Scientific & Industrial Research ) registration norms to enable early-stage DeepTech startups to access R&D-linked benefits, it said.

A follow-up mechanism will be established to review progress and document actionable recommendations for supporting long-term innovation, it added.

The Minister emphasised the importance of scaling domestic capital, nurturing homegrown funds, and encouraging startups to contribute to Aatmanirbhar Bharat by developing frontier technologies in India.

The discussions focused on strengthening India's DeepTech ecosystem and identifying policy measures to support innovation-driven growth.

The interaction included discussions with DeepTech and semiconductor startups working in areas such as semiconductor design, artificial intelligence, quantum computing, robotics, advanced materials, and machine learning infrastructure.

Startups, including Agnit Semiconductors, QpiAI, Nabhdrishti Aerospace, EtherealX, Fabheads, Ethereal Machines, Dozee, Exponent Energy, SignalChip Innovations, and QNu Labs shared their experiences and outlined challenges related to long development cycles, patient capital access, and technology commercialisation.

Investors representing leading funds such as Celesta Capital, Blume Ventures, Avaana Capital, Peak XV, Creagis, and 3one4 Capital shared perspectives on supporting long-term DeepTech innovation, developing sustainable exit pathways, and exploring opportunities for co-investment.