Startup Tax Exemption in India | Benefits Under Income Tax Act

The Indian Government is laying lot of Importance on Startups in India which is why it is offering significant startup tax exemption to startups in India. These tax benefits given to Startups under Income Tax Act, 1961 are important for new businesses, providing essential tax benefits and ease of doing business. As per the Startup India statistics there are over 1.6 lakh startups which are registered under the Startup India programme as on Dec 2024 and more than 3500 startups have been given tax exemptions under Section 80-IAC. The primary purpose of this blog aims to guide startup founders through the process of understanding the process of availing the tax exemptions under Income Tax Act.

Jordensky experts are expert in helping you understand about Startup India registration process and applying for the Section 80 IAC tax exemption. We offer expert support service to your startups to navigate the process smoothly and avail tax exemption benefits for your startup.

What is Startup Tax Exemption?

The Startup tax exemptions is specially designed to encourage the early stage business by providing the 100% deduction on profit and Gains by providing tax relief through Income tax exemptions. The government introduced Startup tax benefits under Income Tax Act for to support the startups in India, particularly under Section 80IAC of the Income Tax Act, which allows the eligible Startups to claim the 100% deductions on profits earned and gains. This Income tax exemption for Startups initiative also underscores the value of virtual CFO services in Mumbai, which can help Startups to manage their finances effectively and that leads to overall profit and growth.

Eligibility Criteria for Startup Tax Exemption

To be eligible under Startup India Tax Exemption following condition must be fulfilled by the startup:

• Startup should not complete more than 10 year period from the date of Incorporation
• Startup should be registered as Private Limited Company / Limited Liability Partnership or Partnership firm in India
• Annual Turnover of the Startup should not exceed 100 Cr for any of the financial year since the incorporation
• Startup should work towards innovation, improvement of existing process, building employment opportunities or wealth creation
• It should not formed by splitting the existing companies or restructuring of old companies

Moreover, CFO services in Pune can be instrumental in make sure that compliance with these requirements.

‍Benefits of Startup Tax Exemptions

The Startup tax exemption in India has various benefits such as :

• Tax Holiday of 3 years in block period of 7 Years
• Long Term Capital Gain Tax Exemption under Section 54 EE
• Tax Exemption to the Investor (Angel Investor) on Investment in the equity share of the startup company under Section 56
• Startup can claim setoff of Carry forward losses and capital gains in case of change in shareholding pattern

Additionally, make sure to know the Income tax benefits for Startups and utilizing the virtual CFO services in Bangalore can further streamline financial management during this critical phase.

Jordensky offers CFO services who are expert and can provide assistance to startups in India for availing Income tax exemptions under Section 80IAC, ultimately helping business in India with a smooth and efficient application process.

Step-by-Step Process to Claim Startup Tax Exemption

1. Get Recognized: make sure that your startup should recognized under the Start up India initiative while opting the startup tax exemption process.

2. Apply for Exemption: the process to apply for startup tax exemption including the Submission of application for tax exemption under Section 80IAC.

3. Document Submission: Provide all the necessary documents, such as the recognition certificate and incorporation certificate for the submission of the application for startup India tax exemption.

4. Approval Process: Navigate the approval process and make sure to file the application with the Income Tax Department.

5. Monitoring and Renewal: Keep track of your exemption status and follow the guidelines for renew if applicable.

FAQs

Who can apply for startup tax exemptions in India?

For Startups, they can apply for tax exemptions when they recognized under the Startup India initiative.

What are the benefits of tax exemption under Section 80IAC?

Startups can enjoy a 100% deduction on profits for three years, when they are eligible Startups for three consecutive assessment years under section 80IAC, which helps to reducing their tax burden.

How long does it take to get approval for startup tax exemption?

The approval timeline of tax exemption may change, but typically it taking a few weeks to a few months that depending on the completeness of the application.

Understanding the startup tax benefits under the Income TaxAct, section 80IAC is important for to utilize the tax exemption and it leads to maximizing your business's financial potential.

Are Startup exempted from Income Tax Act?

Not all startups are exempted from Income Tax Act, only startup who has received tax empetion certificate from DPIIT under Section 80IAC are exempted from Tax Exemption