Startup Recognition and Tax Exemptions

Startup Recognition:

Under the Startup India Action Plan, startups that meet the definition as prescribed under the G.S.R. notification 501 (E) are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.

Eligibility Criteria for Startup Recognition:

  1. The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership

  2. Turnover should be less than INR 25 Crores in any of the previous financial years

  3. An entity shall be considered as a startup up to 7 years from the date of its incorporate or 10 years in case of Startups in the Bio Technology sector

  4. The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth

For more details please refer to the attached notification here

 

Startup India: 80 IAC Tax exemption:

Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first seven years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

  1. The entity should be a recognized Startup  

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

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

Refer to the attached notification for details here

Startup India: Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)

Post getting recognition a Startup may apply for Angel Tax Exemption.

Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act:

  1. The entity should be a DIPP recognized Startup

  2. Only a private limited company may apply for Tax Exemption under section 56 of the Income Tax Act

  3. The investor’s net worth should be more than INR 2 Crore as on the last date of the preceding financial year or the average income should be more than INR 25 lacs per annum for the preceding three financial years

Refer to the attached notification for details here

 

Disclaimer

  1. Department of Industrial Policy and Promotion, Ministry of Commerce and Industry has not appointed any Agency/Representative/ Franchise for DIPP Certificate of Recognition for Startups.

  2. Application for Startup India Certificate of Recognition should be filed by the Startup on its own, using own details/ mobile No./ email.

  3. Ministry of Commerce and Industry does not charge any fee for DIPP Certificate of Recognition for Startups.

  4. Any charging of fees for Recognition for Startups is illegal and will invite appropriate legal action.