Tax Benefits Available For Startups

Tax Benefits Available For Startups

All tax benefits are available to the startups only if they come under the criteria of an ‘Eligible Startup’.

So let’s try to understand the conditions to be met to qualify as an ‘Eligible Startup’.

Eligibility Criteria for Startup Recognition:

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

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Tax benefits allowed to Eligible Startups :

80 IAC Tax exemption

An Eligible startup (incorporated between 1 April 2016 to 31 March 2022) can avail a deduction of 100% of profits for a block of 3 years in the first 7 years of its incorporation. Such deduction would be available upon filing an application with DPIIT provided that that annual turnover does not exceed Rs.25 crores in any financial year.

Waiver from ‘Angel tax’ 

Domestic companies are required to issue their shares at fair market value (FMV) determined on a net assets value basis or discounted cash flow basis determined by the merchant banker. Any amount received by the company from residents in India in excess of FMV is liable to tax in the hands of the company (popularly known as ‘Angel tax’). Upon filing the requisite declaration with DPIIT and subject to certain conditions, Eligible startups are exempted from Angel tax.

Tax exemption to Individual/HUF on investment of long-term capital gain in equity shares of Eligible Startups u/s 54GB. 

The startups shall also use the amount invested to purchase assets and should not transfer assets purchased within 5 years from the date of its purchase.

1. Thus, if an individual or HUF sells a residential property and invests the capital gains to subscribe the 50% or more equity shares of the eligible startups, then tax on long term capital will be exempt provided that such shares are not sold or transferred within 5 years from the date of its acquisition.

2. The existing provisions u/s 54GB allows the exemption from tax on long-term capital gains on the sale of a residential property if such gains are invested in the small or medium enterprises as defined under the Micro, Small and Medium Enterprises Act, 2006. But now this section has been amended to include exemption on capital gains invested in eligible start-ups also.

What is e-RUPI and how it works?

Exemption from tax on Long-term capital gains

A new section 54 EE has been inserted in the Income Tax Act for the eligible startups to exempt their tax on a long-term capital gain if such a long-term capital gain or a part thereof is invested in a fund notified by the Central Government within a period of six months from the date of transfer of the asset.

The maximum amount that can be invested in the long-term specified asset is Rs 50 lakh. Such amount shall be remain invested in the specified fund for a period of 3 years. If withdrawn before 3 years, then the exemption will be revoked in the year in which money is withdrawn.

Other benefits available for Startups :

  • Simple process for registration of startup
  • Self-certification of compliance under Environment and Labour laws.
  • Easy access to funds through Alternate Investment Funds.
  • Easy winding up of Company within 90 days under Insolvency & Bankruptcy Code,2016.
Recent Posts

Latest Tax Updates

Today’s Tax Updates

1. Companies can now hold Board Meetings via video conferencing for any agenda item. MCA Notification GSR 409(E) of 15.6.21.

2. Tax Deduction At Source (TDS) under Section 194Q of The Income Tax Act, 1961 (effective from 01.07.2021) To further extend the tax base, the government has introduced a new section 194Q of the Act vide the Finance Act 2021 and made the same effective from 1st July 2021.

7 GST Circulars issued today 

3. DECODING OF NEW REGISTRATION FORMS FOR TRUST. If a trust is already registered u/s 12 AA and has filed a return of income for AY 20-21 then
No need to file a copy of the Balance Sheet.

4. GST: Fastag data has been integrated with the e-way bill system. On a daily average, 24 Lakh Fastag transactions from 826 toll plazas, related to commercial vehicles are exchanged between NPCI/NHA and NIC systems. These details will help the GST officers to track the movement of e-way bills using the new analytical reports.

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5. Income Tax: Business Run by Karta of HUF Cannot Be presumed to be Joint Family Business: Case Name: Kiran Devi Vs The Bihar State Sunni Wakf Board & Ors. (Supreme Court of India). Appeal Number: Civil Appeal No. 6149 of 2015 Date of Judgement/Order: 05/04/2021

Income tax will soon be processing in one day; Integrated e-filing system needs to develop by Infosys

The administration on Wednesday said IT major Infosys will build up the cutting edge pay charge recording framework for Rs 4,241.97 crore which will chop down the handling time for comes back to one day from 63 days and speed up discounts.

The Cabinet, led by Prime Minister Narendra Modi, gave its “endorsement to consumption authorize of Rs 4,241.97 crore for Integrated E-recording and Centralized Processing Center 2.0 Project of the Income Tax Department”, Union clergyman Piyush Goyal said

Preparation media about the choice, he said the handling time at present for Income Tax Reurn (ITR) is 63 days and it will boil down to one day after execution of the task.

Goyal said the venture is relied upon to be finished in year and a half and will be propelled following three months of testing.

Infosys, he stated, has been chosen to execute the task after the offering procedure.

The present framework, he stated, has been a triumph and new undertaking will be more assessment amicable.

The e-recording and Centralized Processing Center (CPC) ventures have empowered start to finish mechanization of all procedures inside the Income Tax Department utilizing different inventive strategies to give citizen administrations and to advance deliberate consistence.
The Cabinet likewise authorized a merged expense of Rs 1,482.44 crore for the current CPC-ITR 1.0 undertaking up to 2018-19.

Goyal additionally educated that expense discounts worth Rs 1.83 lakh crore have been issued so far in the current monetary.

The choice will guarantee straightforwardness and responsibility other than quicker handling of profits and issue of discounts to the citizens’ ledger specifically with no interface with the Income Tax Department.

The expansive’s target of the reconciliation venture incorporates quicker and exact results for citizen, upgrading client involvement with all stages, enhancing mindfulness and training through persistent commitment, as per an official discharge.

Furthermore, it will likewise be advancing deliberate expense consistence and overseeing extraordinary interest.

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