Budget 2024: Zerodha's Nithin Kamath proposes big change in capital gains from the sale of property to boost startups

Nithin Kamath, co-founder of Zerodha, has highlighted structural unemployment among Indian youth as a significant economic challenge. Speaking on social media platform X, Kamath stressed the importance of addressing this issue ahead of the Union Budget to ensure balanced economic progress.

In his post, Kamath said, economic growth will remain uneven unless this issue is addressed. Here's what he said, "One of the biggest challenges the Indian economy faces is structural unemployment among youth. Growth will always be uneven unless this improves."

"Part of the solution is to do everything to encourage entrepreneurs, even in small towns and villages in India. VCs will never go to these areas. Which means other wealthy people are the best hope. One of the things I hope the budget addresses is section 54F."


"This section offers tax exemptions on the capital gains earned from the sale of any asset if the proceeds are reinvested in a residential property. Including investments in startups along with investments in residential property can make startup investing mainstream. Even though some people may misuse the law, the potential upside is infinitely greater and worth the minor risk."


Despite India's robust economic growth rates exceeding 7% in recent years, the country continues to face substantial challenges in generating sufficient employment opportunities. The issue of jobs featured prominently in recent General Elections, prompting expectations for targeted measures in the upcoming budget session.

According to the World Bank, India's workforce comprises 593.7 million individuals, with approximately 90% employed in the informal sector. While the overall unemployment rate for those aged 15 and above decreased from 6.1% in 2017-18 to 3.2% in 2022-23, formal employment remains limited, posing a persistent challenge.

Kamath advocated for stimulating entrepreneurship in small towns and villages, areas often overlooked by traditional venture capitalists. He remarked, "VCs will never go to these areas. Which means other wealthy people are the best hope," highlighting the need for alternative support mechanisms.

Ahead of the Union Budget, Kamath proposed amendments to Section 54F of the Income Tax Act. Currently providing tax exemptions on capital gains reinvested in residential property, Kamath suggested extending these benefits to include investments in startups. He argued that integrating startup investments into this provision could catalyze growth in the sector and mitigate youth unemployment.

Acknowledging concerns about potential misuse, Kamath maintained that the benefits of such reforms outweigh the risks. He expressed optimism about the transformative impact of incentivizing startup investments alongside residential property.

Recent RBI data revealed significant job creation in India, with 4.67 crore jobs added during FY24. However, challenges persist, particularly concerning job quality and the formalization of employment across various sectors.