Exemption of 80 IAC Under Startup [CS Hera Siddiqui]



Section 80-IAC: Tax Incentives for Startups

To initiate the development of startups in India and provide a competitive platform for businesses which are newly established to thrive amidst the aggressive business atmosphere, the Government of India has introduced Section 80-IAC in the Income Tax Act. Section 80-IAC mentions that an eligible startup shall be allowed a deduction of an amount equal to 100 per cent of the profits and gains. With the intention to promote job-creating entrepreneurs, this section was promulgated as part of the Finance Act of 2016 and was later amended in the Finance Bill of 2018.

To avail the deductions offered by this section, a startup should engage in the eligible business for three consecutive assessment years out of seven years (five years until the assessment year 2017-18) beginning from the year in which the qualified startup was incorporated. To provide a useful incentive for startups and aid their growth in the early phase of businesses, a new known as Section 80-IAC has been introduced. Accordingly, a deduction of 100 per cent of the profits and gains derived by an eligible startup from a qualified business is allowed for any three consecutive assessment years among the five years beginning from the particular year in which the eligible startup is incorporated. This article briefly discusses Section 80-IAC of the Act, that offers tax incentives for startups in India.

Following must be submitted at start up India to avail the benefits:

Form 80IAC: Pitchdeck Guidelines

Please ensure that you provide all the following details in your pitchdeck:

-Information about the product/service offering of your startup

-Brief about how is your startup innovative and/or scalable (Uniqueness/USP of the startup that differentiates from its competitors in the market)

-Director details and their educational qualification, professional experience, and formal role in the startup/current designation (if any)

-Shareholding pattern as on the date of filling this application

-Directors and Shareholders’ citizenship details

-Team details – current role, education, and professional experience

-Details about adherence to the specific government approvals required by the startups such as FSSAI registration, guidelines set by Bureau of Indian Standards

-Revenue model i.e. details of how the startup generates revenue

-Funding received from private investors or Angel/VC funds (Yes/No); if yes, please add names and details of the investors

-If any support (monetary/non-monetary) is received from Central or State Government Ministries/Departments/PSUs/Incubators

-Details of any public/private sector awards won by the start up

- Number of people directly employed with your start up.

-Number of customers/clients – Paying customers/users with a copy of at least one Contract/Work-Order/MoU or the number PlayStore/AppleStore downloads in case of mobile applications along with a screenshot of the app listing on these platforms

-Link to your startup’s website

-Screenshots/images of your product/website.

Form 80IAC: Video Guidelines

Please ensure that you provide all the following details in your Video link:

-The video should ideally be of 2-3 minutes and be no longer than 5 minutes

-Please showcase the working of the product(s) prototype/proof-of-concept developed by your startup

-If you are a product or software based startup then showcasing a demonstration/prototype/walk-through of the product(s)/software product(s) developed by you is compulsory

-If you provide software or technology services such as website development, application development, developing white-label software products for clients, then please showcase a demonstration/prototype/walk-through of the product(s) developed for your key clients

-Please also showcase the market traction that your product/service has generated through either online customer reviews, client testimonials (video/text are acceptable), or any other similar appreciation/feedback received

Note: Please upload the video is uploaded on a third-party video hosting platform such as Youtube or Vimeo. In case you are uploading the video on Google Drive please make sure that it is NOT access restricted

Lex comply

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