Tax Exemption for Startup Under Section 80-IAC

Under the Startup India Scheme of the government of India, start-ups may apply for tax exemption for three years within ten years of their establishment. We assist the start-up in obtaining tax exemption u/s 80IAC.

Tax Exemption for Startup under Section 80IAC

Newly established and incorporated startups often need more financial resources during their initial stages of operations, which negatively impacts their sales and profits. The situation worsens further when a huge chunk is paid in taxes out of the minimal income they earn. Only a little profit is left behind for reinvestment. Realising this struggle, the government of India introduced Section 80-IAC and Section 56 of the Income Tax Act, 1961, which allows tax exemption for three consecutive financial years out of ten from the date of incorporation to eligible startups recognised by the DPIIT.

Eligibility / Checklist for 80IAC Startup Tax Exemption

The 80IAC Startup Tax exemption criteria depend on factors like DPIIT Recognition, the age of the startup, and its overall business turnover. Also, the innovation factor in its products or services is crucial for claiming the tax exemption. We have explained all the 80IAC tax exemption eligibility criteria below. Ensure all eligibility criteria are satisfied before applying for tax exemption under section 80IAC.

Eligible Business Types

Not all the business structures are eligible for Startup Tax Exemption, and The startup must be a Company, LLP, or a registered partnership firm. Startups established as any other business structure, such as sole proprietorship, are not eligible under the Startup India Scheme of DPIIT.

Incorporated after 1st April 2016

Any startup incorporated/registered after 1st April 2016 and not older than ten years can avail of the tax exemption u/s 80IAC. The DPIIT Startup Tax Exemption is available only for companies with all Indian Promoter. The companies or LLPs with FDI are not eligible.

Turnover not exceeding Rs.100 crores.

The turnover of the applicant startup must not exceed Rs. 100 crores in the Financial Year for which the deduction is claimed. The objective of the Startup India initiative is to provide growth opportunities to budding startups and not to established businesses.

Startup Recognition by the DPIIT

The Department of Promotion of Industry and Internal Trade (DPIIT) must recognize startups, and the startup must obtain a DPIIT Recognition Certificate. Our team can help you to obtain Startup Recognition as well.

New and Original Entity

The applicant must be a new incorporation and should not have been formed by splitting up or reconstructing an existing business. The plant and machinery used by the startup must be new and should not be old or a transfer from an existing plant and machinery already in use.

Innovation & Employment Generation

The startup must have a portfolio of innovative products, services, or processes. Or the development of new or innovative products, services, or processes with the primary aim of financial growth, employment generation, and wealth creation.

List of Documents for DPIIT Startup Tax Exemptions

  • DPIIT Recognition Certificate
  • Incorporation Certificate
  • MOA / Partnership Deed
  • Financial Statements
  • Pitch Deck & Video
  • Aadhar of Authorised Signatory

 

 

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