- May 27, 2023
- Posted by: Advince
- Categories: Blogs, India Taxation
Section 80-IAC of the Income Tax Act, 1961 in India provides tax benefits to eligible startups. It was introduced to promote entrepreneurship and innovation in the country by incentivizing the startup ecosystem. Here are the key features and benefits of Section 80-IAC:-
1) Eligibility Criteria: To avail the benefits under Section 80-IAC, a startup needs to meet the following conditions: a. It should be a recognized eligible startup as per the criteria specified by the Department of Industrial Policy and Promotion (DIPP), which includes factors like innovation, scalability, and employment generation. b. It should be incorporated as a private limited company or a limited liability partnership (LLP) after April 1, 2016, but before April 1, 2023. c. It should be engaged in the eligible business sectors such as technology, biotechnology, manufacturing, or service industry. d. The turnover of the startup should not exceed Rs. 100 crores in any previous year since its incorporation.
2) Tax Holiday: Startups eligible under Section 80-IAC can enjoy a tax holiday for a consecutive period of 3 out of 10 years from the year of incorporation. During this period, the startup’s taxable income is reduced to zero, and no income tax is payable.
3) Carry Forward and Set Off of Losses: Startups can carry forward their losses for set off against future profits. However, the benefit of tax holiday cannot be carried forward or set off.
4) Compliance Requirements: Startups need to comply with certain conditions to continue enjoying the tax benefits. They are required to file income tax returns and fulfill other regulatory requirements as per the provisions of the Income Tax Act.
It’s important to note that the specific details and provisions of tax benefits may change over time, as they are subject to amendments by the government. Therefore, it’s advisable for startups to consult with a qualified tax professional or seek updated information from the concerned government authorities to ensure accurate and up-to-date knowledge of the tax benefits under Section 80-IAC.