STARTUP INDIA: 80IAC TAX HOLIDAY FOR START-UPS 

For Indian start-ups, a number of reforms and relaxations have been implemented in order to further encourage entrepreneurs and start-ups. The government has established a ministry (department) that is devoted to assisting start-up firms in order to encourage and support entrepreneurs. The Indian Central Government has also launched a number of programmes to support startups and encourage entrepreneurship in India. After April 1, 2016, eligible startups can receive three consecutive financial year exemptions from paying income tax throughout their first ten years since formation.

The Government of India has added Section 80-IAC to the Income Tax Act to kickstart the growth of startups in India and give newly founded enterprises a competitive platform to survive in the competitive business environment. In order to encourage job-creating entrepreneurs, Section 80-IAC states that an eligible startup should be permitted a deduction of an amount equal to 100% of the income and gains earned from qualified business for three consecutive years out of ten years.

Major benefits:

a) Tax incentives for 3 year out of 10 years from incorporation for recognized startups in India

b) Deduction of an amount equal to 100 per cent of the profits and gains.

Points to be kept in mind to avail the benefits:

1. Website link, video link, presentation of startup as per the guidelines is the first priority

2. Startup should have filed its financials and ITR with the concerned department

3. Detailed USP of the startup that differentiates from its competitors in the market.

4. Information on adhering to the particular government approvals needed for startups, such as the standards established by the Bureau of Indian Standards.

5. Showcase the market traction that the startup has already generated

6. Showcase a demonstration/prototype/walk-through of the product developed for your clients.

7. Startup logins and certificate

8. Prior funding details

Eligibility criteria:

1. Turnover has not exceeded one hundred crore rupees since incorporation

2. Entity is working towards innovation, development, of products or services with a high potential for wealth creation.

3. Startup eligible upto ten years from date of incorporation for availing 80 IAC registrations.

Required details for application:

1. CA certified updated annual financial statements

2. Video Link mandatory of max 5 minutes: 

3. Pitchdeck required with Website link

4. Certificate, MOA, Email, Phone number

5. Authorised Signatory details

6. Images of products or services

Recent updates:

It is pertinent to note that the sunset date for claiming deduction under this provision has been proposed to be extended to March 31, 2023 by the Finance Bill, 2022

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