Eligibility, Tax Exemptionsand Incentives

Startup India

Prime Minister Narendra Modi proclaimed the StartupIndia campaign in 2016 to boost entrepreneurship in India.

The action plan aimed at promoting bank financing forstartups, simplifying the incorporation of startup process

and grant of various tax exemptions and other benefits tostartups.

But all the benefits and exemptions are available to the

startups only if they come under the criteria of an ‘EligibleStartup’.

So first let’s understand the conditions to be met to qualify

as an “Eligible Startup”

The entity should be a recognized Startup.

Only Private limited or a Limited Liability Partnership is eligible for Tax exemptionunder Section 80IAC.

The Startup should have been incorporated after 1st April, 2016.

Post getting recognition a Startup may apply for Tax exemption under section 80 IACof the Income Tax Act. Post getting clearance for Tax exemption, the Startup can availtax holiday for 3 consecutive financial years out of its first ten years sinceincorporation. Eligibility Criteria for applying to Income Tax exemption (80IAC):

Startup India: 80 IAC Tax exemption

Startup India: Tax Exemption underSection 56 of the Income Tax Act

The entity should be a DPIIT recognized Startup

Aggregate amount of paid up share capital and share premium of theStartup after the proposed issue of share, if any, does not exceed INR 25Crore.

Post getting recognition a Startup may apply for Angel Tax Exemption. Eligibility Criteria for Tax Exemption under Section 56 of the IncomeTax Act:

Tax exemptions allowed to EligibleStartups

3 year tax holiday in a block of seven years

Exemption from tax on Long-term capital gains

Tax exemption on investments above the fair market value

Tax exemption to Individual/HUF on investment of long-termcapital

Benefits to startups by IndianGovernment

Simple processReduction in costEasy access to fundsApply for tendersR&D FacilitiesNo time- consuming complianceChoose your investorEasy exitMeet other entrepreneurs

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