Startup India Scheme Services

Section 80-IAC of the Income Tax Act presents a valuable opportunity for eligible startups to benefit from profit-linked tax holidays. These tax holidays provide a window of exemption for any three consecutive years within the first ten years from the year of their incorporation. To avail this benefit, startups must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT), underscoring the significance of DPIIT approval and recognition in claiming tax exemption.

This provision applies to startups that have been incorporated on or after April 1, 2016, ensuring that relatively newer entities can avail themselves of the tax benefits. According to Section 80-IAC, eligible assessee startups that generate profits can claim 100% tax deductions for three consecutive years. It is crucial to note that startups claiming the 80-IAC tax exemption must be original entities, not formed as a result of a split or reconstruction of an existing business.

In line with the objective of fostering entrepreneurship, Start Up India offers financial assistance to startups through the Startup India Seed Funding scheme. This initiative aims to support startups in their early stages, providing them with the necessary resources to develop proof of concept, build prototypes, conduct product trials, enter the market, and drive commercialization.

Under the Startup India Seed Funding scheme, financial assistance is available in the form of grants and debt/convertible debentures. This support serves as a stepping stone for startups, enabling them to progress to a stage where they can attract investments from angel investors, venture capitalists, or obtain business loans from financial institutions.

Entrepreneurs in their nascent stages can benefit from this scheme, as it provides them with up to Rs 50 lakh in financial support through incubators. This funding empowers startups to overcome initial challenges, fuel innovation, and accelerate their growth trajectory.

By availing the Startup India Seed Funding, startups gain the necessary financial backing to transform their ideas into reality, fuel their development, and establish a strong foundation for future success.

Angel tax, as per Section 56 (2) (viib) of the Income Tax Act, refers to the tax imposed on privately held companies when their shares are issued at a rate higher than the fair market value. Startups that demonstrate exceptional growth often face this tax liability.

However, not all startups are eligible for angel tax exemption. To qualify for this exemption in India, a startup must be recognized by DPIIT (Department for Promotion of Industry and Internal Trade). Additionally, the aggregate amount of paid-up share capital and share premium of the startup after issuing or proposing shares should not exceed INR 25 crores, and the fair market valuation must be certified by a merchant valuer.

It’s important to note that while calculating the threshold of INR 25 crores, the amounts of paid-up share capital and share premium received from non-residents, venture capital companies, or venture capital funds will not be considered.

By meeting these criteria, recognized startups can avail themselves of angel tax exemption, enabling them to attract investments without the burden of excessive taxation.

Startups registered with DPIIT can unlock significant tax benefits through a streamlined process. To claim exemption from income tax for three consecutive years within their first ten years of incorporation, startups must present their idea and execution plan to the Inter-Ministerial Board (IMB). These tax concessions are part of the broader range of Startup India tax benefits designed to support new ventures. By availing themselves of these benefits, startups can alleviate their financial burden and redirect resources towards growth and innovation. The exemption from income tax empowers startups to reinvest their earnings, foster expansion, and drive long-term sustainability. The certification by the IMB is crucial for startups to access these tax benefits and capitalize on the supportive ecosystem fostered by the government.

Startup India recognizes the importance of patents for startups and offers a simplified process to acquire them. Startups that require patents for their unique products or services can avail themselves of substantial benefits under this scheme. They can receive rebates of up to 80 percent of the patent cost, making it more affordable to protect their innovative ideas. Additionally, the patent facilitation process is free, further reducing the financial burden on startups. DPIIT registered startups enjoy the advantage of having their patent applications fast-tracked for examination. Moreover, the government provides a panel of facilitators to assist with filing intellectual property applications, with the associated costs covered by the government. By approaching one of the government-issued facilitators, startups can obtain patents and trademarks at a significantly reduced cost, paying only the statutory fees. This support encourages startups to safeguard their innovative ideas and gain a competitive edge in the market.

Streamlining the regulatory process, Startup India allows startups to self-certify compliance for six Labor Laws and three Environmental Laws through a user-friendly online procedure. This self-certification relieves startups from excessive regulatory burden, enabling them to concentrate on their core business activities. Moreover, startups operating in 36 white category industries listed on the Central Pollution Control Board’s website enjoy exemption from clearance requirements under three environment-related Acts for a period of three years. This simplified compliance framework aims to foster a conducive environment for startups, promoting innovation and growth.