Tax Exemptions for Startups
The upsurge in the number of startups in India has been crazy ever since the introduction of the Startup India program by the Central Government in early 2016. The program - primarily devised to encourage more individuals to launch their startups with much less hassle - promises countless benefits and advantages while allowing them to operate at their own pace and comfort. To further encourage the startup ecosystem, new Tax Exemptions were put in place during the Budget Speech of 2021, which has truly been a catalyst for the upswing thenceforth.
But based on our experience interacting with our clients at 2nd Innings, we can say that most of them were unaware of these exemptions and the privileges they were missing out on! It was an eye-opener and we realised it is imperative that we explained these exemptions in a nutshell so that you don't miss out on the perquisites.
There are two important sections under the Income Tax Act with reference to tax exemptions for startups. They are Section 80IAC and Section 56. Here, we take a look at Section 80IAC in detail.
80IAC – This section provides for a deduction of an amount equal to 100% of the profits derived from an eligible business by an eligible start up for 3 consecutive assessment years out of 10 years at the option of the assessee.
Eligibility norms for claiming exemptions under 80IAC:
1) The entity shall be incorporated as a Company or Limited Liability Partnership.
2) Incorporated on or after 1st April 2016 but on or before 31st March 2022.
3) Turnover of the entity should be less than 100 Cr in any of the previous financial years.
Merely getting recognized by DPIIT will not automatically make a startup to qualify for this exemption. One needs to apply through Startup India portal.
While applying, keep the following details ready with you:
a) Memorandum of Association or LLP Deed as applicable.
b) Board Resolution, if any.
c) Chartered Accountant Certified Profit and Loss Account, Balance Sheet and Income Tax Return Copies.
d) Startup Video Link – The video shall be ideally of 2 to 3 minutes but less than 5 minutes. Showcasing your product/services/testimonials from clients etc. Video link of Youtube, Vimeo or Google Drive is accepted. Detailed video guidelines toolkit is available from Startup India Portal.
e) Startup Pitch Deck – A proper Pitch Deck covering all aspects from information about the product/service, company, its directors, shareholding pattern, adherence to government licenses approval etc wherever applicable, details about revenue streams, employment opportunities, funds received, number of customers etc. These are only indicative. You can register on the Startup India Portal (https://bit.ly/3eCwlKX) and get a detailed toolkit to begin with.
The Startup India program is very propitious for aspiring entrepreneurs and the fact that every year, more benefits and tax exemptions are being introduced, makes its future sanguine even among the post pandemic economic wobbles. For any query, or to get assistance and advice with availing these exemptions, feel free to get in touch with our experts at +91 093877 77665 or +91 98474 57527 anytime.
