Clarification on eligibility of Startups for tax exemption

The Central Board of Direct Taxes (CBDT) in a press release 22nd August, 2019 has clarified that the start ups with turnover upto Rs. 25 crores will get tax holiday on fulfilling certain conditions.

A start up is eligible for 100% deduction of income under section 80 IAC under the income tax Act 1961 for up to three years. The start ups seeking exemption will have to fulfil the eligibility criteria under the said section, and it is not enough for the company to be merely registered with the Department of Promotion of Industry and Internal Trade (DPIIT).

To remove the confusion over the eligible turnover limit, the CBDT said there is no contradiction in DPIIT’s notification dated 19.02.2019 and the income tax provisions. The DPIIT notification clearly states that a start-up shall be eligible to apply for the certificate from the Inter-Ministerial Board of Certification for claiming deduction only if they fulfill the conditions specified in Section 80-IAC.

It has been further stated that section 80-IAC contains detailed definition of the eligible start-up and conditions required to be fulfilled:

i) It must be incorporated on or after April 1, 2016.

ii) The turnover must not exceed Rs. 25 crore in a year of deduction.

iii) It must hold a certificate from the Inter-Ministerial Board of Certification.

Click here to read the press release.

Click here to read more on DPIIT notification.