INCOME TAX EXEMPTIONS FOR START-UPS

Overview

Section 80IAC of the Income Tax Act, 1961 provides a tax exemption for eligible startups in India. This section was introduced to promote entrepreneurship and innovation in the country by providing tax benefits to eligible startups.
Under Section 80IAC, a startup that meets the specified criteria can claim a 100% tax exemption on its profits and gains for a consecutive period of three out of ten years from the year of its incorporation.

Eligibilty Criteria

01

Registration

It should be registered as a private limited company or a partnership firm or a limited liability partnership.

02

Turnover

Its turnover in any of the previous financial years should not exceed INR 100 Crores.

03

Duration

The entity can be considered a start-up for up to 10 years from the date of its incorporation.

04

Nature of business

The business should be engaged in innovation or improvement of existing products, services, or processes, with the potential to create employment and wealth.

05

For New Business Only

An entity that is formed by the splitting up or reconstruction of an existing business shall not be considered a “Startup”.

Documents Requirements

Required in Soft Copy Only

Documents Required

Name, Regd.address and nature of business
Incorporation Details ( Date of Incorporation and CIN / LLPIN)
Contact Information (E-mail ID and Contact Number)
Permanent Account Number (PAN) of the entity
DIPP Number of the entity after its recognition by the DPIIT
MOA,& AOA / LLP Agreement/ regd. Partnership deed
Board Resolution
Last 3 Years finacials attested by CA
Copy of Certificate obtained under section 56 of the Income Tax Act (Eligibility under this section)

Steps

Step 1

Possess all the required documents in the correct formats and updated information to be submitted on portal.

Step 2

Log into the portal and choose Apply for Tax Exemption under Main Menu Recognition

Step 3

Fill out all important information like Name, Address, Activity, Contact details, PAN, DPIIT Number

Step 4

Attach all mandatory documents like MOA,AOA / LLP Agreement / Regd. Partnership Deed, Annual Accounts, ITR,Video Link, Pitch deck Explaining product prototype and Idea Behind establishment of Start up.

Step 5

Fill out information of Authorised Signatory, Usually one of the Director / designated partner appinted by BOD as a authorised signatory

Step 6

After submission of out all necessory information and documents, application will be processed by the concerned authority, and if approved, start up will be able to claim tax exemptions.

Frequently Asked Question

Department of Promotion of Industry and Internal Trade (DPIIT) approve the application for 80 IAC exemption

Startups can get 3 consecutive years of tax holiday out of 10 years from date of Incorporation.

Only Company, LLP and Regd. Partnership Firms are eligible to claim deduction under 80IAC

Usually application gets processed within 2 to 3 weeks of time, however it depends on several factors and final decision in the Meetings of the inter-ministerial body

There is no fee for application under 80IAC

Yes,the machinery should have never been used in India and no depreciation should have been claimed on it in India before its installation

Reconstructed businesses cannot claim 80IAC exemption, unless they fall under section 33B of the Income Tax Act,

An entity shall cease to be a Startup on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds one hundred crore rupees.

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INCOME TAX EXEMPTIONS FOR START-UPS