Startup Recognition & Tax Exemption
Under the Startup India Action Plan, startups that meet the definition as prescribed under vide G.S.R. 127(E) dated 19th February, 2019 are eligible to apply for recognition under the program. The Startups have to provide supporting documents, at the time of application.
Eligibility Criteria for Startup Recognition:
1. The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership.
2. Turnover should be less than INR 100 Crores in any of the previous financial years.
3. An entity shall be considered as a startup up to 10 years from the date of its incorporation
4. 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 at 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 for Income Tax exemption (80IAC):
1. The entity should be a recognized Startup
2. Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
3. The Startup should have been incorporated after 1st April, 2016.
Startup India: Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)
Post getting recognition at Startup may apply for Angel Tax Exemption.
Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act:
1. The entity should be a DPIIT recognized Startup
2. The aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed INR 25 Crore