The thousands of startups that have been registered under India’s Startup Movement have made startups an integral and vital part of the country’s economy. A lot of these startups have been tremendously successful. As a result, the government continues to encourage startups through several schemes and waivers that help them survive and succeed. One of those encouraging aspects is tax benefits to startups. Let us look at five of them through this article.
5 Startup Tax Benefits Under the Income Tax Act
Once you register your startup with DPIIT, you may be entitled to these benefits. Remember, below is an overview of the various tax benefits that you may avail as a startup. For a more detailed explanation, understanding of a particular exemption, and the conditions associated with it, connect with Valuation India.
1. Angel Tax Exemption
What is an angel tax? If a closely held company raises funds through its shares to an Indian resident at a price higher than its Fair Market Value (FMV), then the excess amount higher than the FMV will be charged to tax as other income sources in the hands of the issuer. Startups registered under DPIIT can get an exemption for angel tax, provided they file the necessary declarations, submit the required documents, and meet the specified criteria. For more details and assistance on the processes governing it, connect with expert startup tax consultants like Valuation India.
2. Deduction Under Section 80-IAC
Deduction under section 80-IAC is available of 100 percent profits to an eligible startup. However, it is available only for three consecutive years out of seven years from its incorporation date. Claiming this benefit requires a startup to fill the necessary forms and applications and meet specific administrative, financial, and operational criteria.
3. Tax Exemption Under Section 54GB
This is for shareholders who invest in an eligible startup. It is available to an individual or a HUF in regard to any long-term capital gain resulting from the transfer of a residential property. The exemption can be claimed if the net consideration amount is invested, prior to the due date of furnishing of income return, in a company’s equity shares after fulfillment of the conditions specified. Connect with Valuation India for a detailed explanation of this exemption.
4. Relaxation in Provisions for Set Off and Carry Forwarding Losses
Under Section 79 that pertains to set off and carry forward of losses, it has been provided that the losses incurred by the closely held eligible startup will be permitted to be carried forward and set off against the previous year’s income on the fulfillment of either continuity of 51 percent shareholding, or continuity of 100 percent of original shareholders.
5. Dedicated Startup Grievance Redressal Cell
Startups have a dedicated grievance cell started by CBDT. The cell works under the member of CBDT and helps startups in resolving their problems. Startups can connect with the cell by post or through email or telephone.
Are you a startup looking out for a startup tax expert in India? Partner with Valuation India and get every assistance relating to startup tax payments, exemptions, benefits, and formalities. For details, connect with Valuation India today.