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Tax Benefits Under Startup India Registration


What is StartUp India Registration

The Startup India registration action plan was launched in 2016. The initiative of the Indian government to simplify the process of patent filing and establishing a startup is the main reason we are experiencing so many new Indian startups initiatives at this time. Many new startups are contributing to the Make In India initiative of the Indian government. A startup is a young initiative endeavor by a handful of people or sometimes, even an individual. The government is promoting Indian startups by making Make In India a priority.

Various Tax Benefits under Startup India Registration

Many tax benefits and exemptions have been provided by the government of India to the startups in India. The first step in gaining the tax benefits for a startup in India is to make the startup a government-recognized startup. For this, under the Startup India Action Plan, a  proper definition of the startups has been given under the G.S.R notification 127(E). You can apply for your startup to get recognition under the said program. Some important documents have to be submitted in order to gain government recognition.

A company can gain the status if it is incorporated as a private limited company and its annual turnover should be lower than INR 100 Crores. When a company gains startup recognition in India by the government under the StartUp India plan, it is benefited in terms of certain tax exemptions. There are many tax benefits for Indian Startups. Having a fair knowledge of these might help those ambitious people who want to launch a startup in India.

80 IAC Tax Exemption

After getting proper recognition from the Indian government, startups in India can apply for certain tax exemptions. Under Section 80 IAC of the Income Tax Act,   Indian startups can apply for tax exemption. There is a certain eligibility criterion for applying to Income tax exemption 80IAC. The concerned startup should have been incorporated only after April 1st, 2016 and it should only be a private limited or limited liability partnership Indian startup to be eligible for this tax exemption. The concerned startup in India should be registered under the department of industrial policy and promotion. For the first three years of a start-up in India,  it can avail tax exemption for three financial years. This tax exemption is very beneficial for all the startups in India as it can hand them in growing and expand their business. It gives a chance to the startups in India to compensate for the cost of setting up the Startup business. In these three years of tax exemption, the Indian startups can succeed without having to worry about paying income tax to the government.

Tax Exemption Under Section 56 of the Income Tax Act, also called the ANGEL TAX

For startups in India that qualify for tax exemption under section 56 of the Income Tax Act,  some criteria have to be fulfilled. First of all, the average income of the concerned startup should not be less than 50 lakh rupees for its last three running years. After issuing shares of a start-up in India capital and share premium should not exceed 10 crore rupees. To receive the angel tax exemption, the concerned startup also has to seek the approval of the Interministerial Board. But due to the StartUp India Program in India, this approval’s requirement was done away with in order to simplify the process for startups in India. All the startups in India (after attaining eligibility from the government) can apply for gaining the status of an angel tax-exempt organization by simply submitting an application regarding the same to the Department Of Industrial Policy and Promotion (DIPP). The application will then be sent to the Central Board Of Direct Taxes (CBDT). They will then investigate and verify the application of the related Indian startup company and either accept the request by giving it the angel tax exemption or simply reject it on the basis of the rules set by the Income Tax Act.

The startup companies can now go directly to the official website of Startup India to gain more information about the various tax exemption benefits and even, for applying for any tax exemptions.

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