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NOTE ON DPIIT 80- IAC TAX EXEMPTION

AN OVERVIEW:

Under the Startup India Action Plan, startups that meet the definition as prescribed under G.S.R. notification 127 (E) are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.

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
  • 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”

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 tax holiday for 3 consecutive financial years out of its first ten years since incorporation.

  • Eligibility Criteria for applying to Income Tax exemption (80IAC):
      • The entity should be a recognized Startup;
      • Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC;
      • The Startup should have been incorporated after 01st April, 2016.

Benefits of 80IAC TAX EXEMPTION:

  • The benefits of Section 80-IAC of the Income Tax Act, 1961, are listed as follows:
      • 100% Deduction on Profits and Gains: Section 80-IAC of the Income Tax Act, 1961, allows eligible startups to deduct 100% of the profits and gains derived from their qualified business for three consecutive assessment years.
      • No Advance Tax Required: Since the total tax liability becomes nil under this provision, eligible startups are exempt from paying advance tax.
      • Reduction in Taxable Income: The deductions available under Section 80-IAC help startups mitigate the tax burden commonly faced during their initial stages. This reduction in taxable income eases financial pressures, allowing startups to utilize their resources more efficiently.
      • A significant advantage is that startups are exempt from the Minimum Alternate Tax (MAT), which is usually imposed on companies with zero taxable income but positive book profits. This means the startup is not subject to MAT during the tax holiday period.

DOCUMENTS REQUIRED FOR OBTAINING REGISTRATION:

  • Incorporation Documents such as MoA, AoA, CoI in case of Company, & LLP Deed in case of Limited Liability Partnership.
  • KYC documents viz., Pan Card, Aadhaar Card, Electricity Bill etc.
  • Board Resolution in case of Company.
  • Details of Annual Accounts of Startup viz., Balance Sheet, Profit & Loss statement, Income Tax Returns for the past three years or from the year of incorporation.
  • Start-up India Certificate;
  • Pitch deck and Video For 80IAC Application.
  • Clarification/Declaration (s) required ancillary to application

CONTACT INFORMATION

Ladda Bhutada & Associates | 360 CompanyBecho Private Limited

  • CS IP: Pramodkumar Ladda
  • Address: Office No. 10, No. 55, Sukhniwas, 15 August Chowk, Mangalwar Peth, Pune – 411011
  • Office Cell: +9199220​ 724607, 93098​ 45448
  • Email: info@csladda.com

 

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