Benefits to Start Ups Under Income Tax By Divyanshu


Startup India is an initiative of the Government of India.

The campaign was first announced by Indian Prime Minister, Narendra Modi during his 15 August 2015 address from the Red Fort, in New Delhi. The action plan for this initiative is based on the following three pillars:

  1. Simplification and Handholding.
  2. Funding Support and Incentives.
  3. Industry-Academia Partnership and Incubation.
Process of getting tax exemption for a Start-up:



A. Definition of startup (Defined by DIPP now DPIIT):
 
Startup means an entity, incorporated or registered in India :
 
  • Up to a period of seven years from the date of incorporation/registration or up to ten years in case of Startups in the Biotechnology sector
  • As a private limited company or registered as a partnership firm or a limited liability partnership
  • With annual turnover not exceeding Rs. 25 crores for any of the financial years since incorporation/registration
  • Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.
Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.
              
An entity shall cease to be a Startup:
 
  • On completion of seven years from the date of its incorporation/registration, ten years in case of Startups in the Biotechnology sector, or
  • If its turnover for any previous year exceeds Rs. 25 crore
B. Process of recognition of an eligible entity as a startup:
 
I. A Startup shall make an online application over the mobile app or portal set up by the Department of Industrial Policy and Promotion.

II. The application shall be accompanied by-
  1. a copy of Certificate of Incorporation or Registration, as the case may be, and
  2. a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.
III. The Department of Industrial Policy and Promotion may, after calling for such documents or information and making such inquiries, as it may deem fit, —
  1. recognize the eligible entity as Startup; or
  2. reject the application by providing reasons.
Certification for the purposes of section 80-IAC of the Act:

A Startup being a private limited company or an LLP incorporated on or after 1st day of April 2016 but before 1st day of April 2021 may, for obtaining a certificate for the purposes of section 80-IAC of the Act, make an application in Form-1 along with documents specified therein to the Board and the Board may, after calling for such documents or information and making such inquiries, as it may deem fit, —
 
I. grant the certificate referred to in sub-clause (c) of clause (ii) of the Explanation below sub-section (4) of section 80-IAC of the Act; or

II. reject the application by providing reasons
 

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