Experts say allowing direct transfer of money from cos to incubator, rather than pulling it up centrally and then disbursing may improve the efficiency.

MUMBAI: The Union Budget has brought cheers to budding campus entrepreneurs, thanks to a couple of proposals that may greatly boost money flow into early-stage startups within institutes. Finance Minister P Chidambaram in his budget speech on Thursday proposed that corporate funds provided to technology incubators located within government-approved academic institutes will qualify as corporate social responsibility (CSR) spends.

"It's a very good initiative and it should lead to more money on campus," Rakesh Basant, professor of economics and chairperson of Centre for Innovation, Incubation and Entrepreneurship at IIM Ahmedabad, says. "If such (corporate) funds can help attract good professionals to run incubators, the efficacy of incubators can improve dramatically," he adds.

That's not all. Even angel investors can now bet their money on new ideas without the fear of taxation as Chidambaram has proposed to extend the 'pass through status' to venture capital funds registered as category I Alternative Investment Funds (AIF). Under the 'pass through status', the taxes on a business are passed through to owners of a business and not external investors. This may encourage angel investors to seek category I AIF registration and boost angel activity.

"It will be a great boon for angel investors. More VCs and angels will be encouraged to fund campus incubatees in the long run," Anil Joshi, president of Mumbai Angels, a Mumbai-based angel network. Experts say allowing direct transfer of money from companies to incubator, rather than pulling it up centrally and then disbursing may improve the efficiency of fund allocation.

Ajit Rangnekar, dean of Indian School of Business, says, "It will also increase the sense of ownership in the donor corporate in supporting and nurturing incubate companies." Corporates too view it as an innovative way of attracting funds on campus.

Santrupt Mishra, CEO, carbon black business and group HR director, at Aditya Birla Group, says, "If we need to build entrepreneurship in the country, incubators are important and hopefully this Budget measure will bring more money on campuses." Milind Sarwate, group CFO at FMCG firm Marico BSE -1.30 %, says the funding of incubators will continue to be driven by their respective economic merit and risk-reward analysis.