AKSHAY KSHIRSAGAR
Startup India Initiative – Eligibility, Tax Exemption and Registration
By Adv Akshay Kshirsagar on 02nd October 2021 2.38pm
Emergence of Startup India
According to the startup India plan all entities that are eligible under this scheme will get tax holiday on profits earned.
Eligibility criteria for Startup India
1. Is Private limited, Limited Liability Partnership Firm or Partnership firm.
2. Have not completed 10 years since incorporation or registration.
3. Annual turnover is not more than 100 crore for any financial year.
4. Is not formed by merger, splitting or reconstructing business already in existence.
5. Entity working towards innovation, development and improvement of products and services or research also generating employment in India.
Tax Exemption for Startup India.
80 IAC Exemption
After getting recognition certificate startup entity may apply for tax exemption on profit earned under 80 IAC deduction. However, MAT and AMT will be applicable for companies and LLP’s even after claiming 80 IAC. To claim deduction 80 IAC entity should be
1. A recognized Startup.
2. Should be Limited Liability Partnership or Private limited.
3. Should have been incorporated after 1st April 2016.
4. Total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021.
The Startup incorporated between April 1, 2016, till 31st March 2022 are eligible for this scheme. Budget 2021 has extended the eligibility to 31st March 2022. Such startups will be eligible for any three consecutive assessment years out of five years beginning from the year in which the eligible start-up is incorporated.
54EE Exemption
A new section 54 EE has been inserted in the Income Tax Act for the eligible startups to exempt their tax on a long-term capital gain or any such a long-term capital gain as notified by government. But investment in the long term specified asset, during any financial year, should not exceed INR 50 Lakhs.
And there is a lock-in period of three years on the amount invested into the long term specified asset. So, assessee cannot transfer or convert the long term specified asset for a period of three years.
Registration Process
You must first incorporate or register your business as Limited Liability Partnership, Partnership or Private Limited Company.
Post incorporation registration visit startup India website. Fill-up the form with details of your business. Enter the one time password which is sent to your e-mail and other details like, startup as the type of user, name and stage of the startup, etc. After entering these details, the Startup India profile is created.
Documents for Registration
1. Incorporation Certificate.
2. Details of Director.
3. Proof of startup and innovation through website.
4. PAN.
5. Patent or trademark details.
Recognition Certificate
The next step after creating the profile on the Startup India Website entity will receive recognition certificate as below.
Department for Promotion of Industry and Internal Trade (DPIIT) Recognition.
This recognition helps the startups to avail benefits like access to high-quality intellectual property services and resources, relaxation in public procurement norms, self-certification under labour and environment laws, easy winding of company, access to Fund of Funds, tax exemption for 3 consecutive years and tax exemption on investment above fair market value.
