In the collective yearning for enlightenment, the inquiry arises regarding the fiscal inducements
accessible to fledgling enterprises within the Indian realm. Hereinafter, I proffer a concise compendium delineating the aforesaid tax benefits bestowed upon such nascent entities.
1. Section
80-IAC provides for a deduction of 100 percent of profits from eligible
business activities. This deduction spans a block of three consecutive
financial years, allowing startups flexibility in choosing this period within
their first five years from the year of incorporation.
2. The
eligibility criteria include an annual turnover not exceeding Rs. 100 crores in
the previous year, and possession of a certificate of eligible business from
the Inter-Ministerial Board of Certification.
3. An
eligible business involves innovation, development, or improvement of products,
processes, or services. Additionally, a scalable business model with high
potential for employment generation or wealth creation aligns with the
criteria. This nuanced definition ensures that startups engaged in
transformative work are the primary beneficiaries of this tax incentive.
4. The
certification is available for private limited companies or LLPs, with the
entity’s existence and operations not exceeding ten years from incorporation.
The annual turnover must not exceed Rs. 100 crores, and the entity should not
have been formed by splitting up an existing business. Furthermore, the entity
should actively work towards the development or improvement of a product,
process, or service, demonstrating a commitment to innovation.
5. Startups
looking to avail tax exemption under Section 80-IAC should register on the
Startup India portal. Entities certified by DPIIT are not automatically
eligible for Section 80-IAC deduction.
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