Increasing the time period and Turnover for eligibility of section 80-IAC for start-ups
Rationalization of provisions of start-ups.
The existing provisions of section 80-IAC of the Act provide for a deduction of an amount equal to one hundred per cent of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of seven years, at the option of the assessee, subject to the condition that the eligible start-up is incorporated on or after 1st April, 2016 but before 1st April, 2021 and the total turnover of its business does not exceed twenty-five crore rupees.
In order to further rationalise the provisions relating to start-ups, it is proposed to amend section 80-IAC of the Act so as to provide that-
(i) the deduction under the said section 80-IAC shall be available to an eligible start-up for a period of three consecutive assessment years out of ten years beginning from the year in which it is incorporated;
(ii) the deduction under the said section shall be available to an eligible start-up, if the total turnover of its business does not exceed one hundred crore rupees in any of the previous years beginning from the year in which it is incorporated.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
[Clause 36]
Extract of Relevant Clauses of Finance Bill 2020
Clause 36:
“Clause 36 of the Bill seeks to amend section 80-IAC of the Income-tax Act relating to special provision in respect of specified business.
The provisions of section 80-IAC, inter alia, provide for a deduction of an amount equal to hundred per cent. of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of seven years at the option of the assessee and the total turnover of its business does not exceed twenty-five crore rupees in the previous year relevant to the assessment year for which deduction under this section is claimed.
It is proposed to amend the said section so as to provide that the deduction under the said section shall be available to an eligible start-up for a period of three consecutive assessment years out of ten years beginning from the year in which the eligible start-up is incorporated and the total turnover of its business does not exceed one hundred crore rupees in the previous year relevant to the assessment year for which deduction under this section is claimed.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.”
Extract of Relevant Amendment Proposed by Finance Bill, 2020
36. Amendment of section 80-IAC.
In section 80-IAC of the Income-tax Act, with effect from the 1st day of April, 2021,–
(i) in sub-section (2), for the word “seven”, the word “ten” shall be substituted;
(ii) in the Explanation, in clause (ii), in sub-clause (b), for the word “twenty-five”, the words “one hundred” shall be substituted.
If the assessee is located in SEZ, can he take 100% deduction u/s 10AA for the first 4 years and then invoke 80IAC for the remaining 3 years where he can gain 100% deduction for the 7 years. The law does not specifically disallows use of 10AA against 80IAC