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TAX EXEMPTION PROPOSAL - Proposal

The Startup India campaign, launched by PM Modi in 2016, aims to promote entrepreneurship through tax exemptions and incentives for eligible startups. To qualify, startups must meet specific criteria, including incorporation type, turnover limits, and innovation focus. Recognized startups can apply for tax exemptions under sections 80 IAC and 56 of the Income Tax Act, with certain conditions regarding incorporation date and capital limits.

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10 views3 pages

TAX EXEMPTION PROPOSAL - Proposal

The Startup India campaign, launched by PM Modi in 2016, aims to promote entrepreneurship through tax exemptions and incentives for eligible startups. To qualify, startups must meet specific criteria, including incorporation type, turnover limits, and innovation focus. Recognized startups can apply for tax exemptions under sections 80 IAC and 56 of the Income Tax Act, with certain conditions regarding incorporation date and capital limits.

Uploaded by

ashvikashvik26
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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TAX EXEMPTION

PM Modi launched the Startup India campaign in 2016 to promote entrepreneurship in


India. The action plan aims to promote bank financing for startups, simplify the
incorporation process, and grant startups tax exemptions and other incentives.

Under the Startup India Action Plan, start-ups that meet the definition as prescribed
under G.S.R. notification 127 (E) are eligible to apply for recognition under the program. But
all the benefits and exemptions are available to the startups only if they come under an
‘Eligible Startup’ criteria.

Eligibility Criteria for Startup Recognition:

a. The Startup should be incorporated as a private limited company or registered as a


partnership firm or a limited liability partnership
b. Turnover should be less than INR 100 Crores in any of the previous financial years
c. An entity shall be considered as a startup up to 10 years from the date of its
incorporation
d. The Startup should be working towards innovation/ improvement of existing
products, services and processes and should have the potential to generate
employment/ create wealth & Development. An entity formed by splitting up or
reconstruction of an existing business shall not be considered a "Startup"

Startup India: 80 IAC Tax exemption:


Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the
Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail of tax
holiday for 3 consecutive financial years out of its first ten years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

a. Must be a recognized Startup


b. Only Private limited, Partnership or LLP is eligible
c. Must be incorporated on or after 1st April, 2016

Post getting recognition a Startup may apply for Angel Tax Exemption.

Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act:

a. The entity should be a DPIIT-recognizedStartup


b. The aggregate amount of paid-up share capital and share premium of the Startup
after the proposed issue of a share, if any, does not exceed INR 100 Crore.

The board shall validate Startups for the following two exemptions:

1. Income Tax Exemption on profits under Section 80-IAC of Income Tax Act

A DIPP recognized Startup shall be eligible to apply to the Inter-Ministerial Board for a
full deduction on the profits and gains from business.2

Provided the following conditions are fulfilled:

• A private limited company, Partnership or a limited liability partnership,


• Incorporated on or after 1st April 2016 but before 1st April 2025, and
• Products or services or processes are undifferentiated, have potential for
commercialization and have significant incremental value for customers or workflow

The deduction is for any three consecutive years out of seven years from the year of
incorporation of startup.

2. Income Tax Exemption on investments above fair market value received under Section
56 of Income Tax Act
A Startup shall be eligible for notification under clause (ii) of the provison to clause (vii) (b)
of subsection (2) of section 56 of the Act and consequent exemption from the provisions of
that clause, if it fulfils the following conditions:

• it has been recognised by DPIIT under para 2(iii)(a) or as per any earlier notification on the
subject
• aggregate amount of paid up share capital and share premium of the startup after issue or
proposed issue of share, if any, does not exceed, 100 crore rupees

FOLLOWING OUR PREVIOUS DISCUSSION, I AM WRITIUNG TO CONFIRM THE SUCCESFULL


MERGER OF THE TWO FIRMS WITHIN THE COMPANY. THIS CONSOLIDATION INSURES A
SEEMLESS PROCESS, FREE FROM CONFLICTS.

Looking forward to serve you in future with best of our services & attention all times.
Thanks & Regards
BRANCH MANAGER
Gunjan Agarwal
8655649405

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