RELIEF FOR STARTUPS IN INTERIM BUDGET 2024

On 1^st February, Finance Minister Nirmala Sitharaman introduced the Interim Budget 2024 in Parliament. An important feature is the deadline for the incorporation of Startup LLP/Company to qualify for the Section 80IAC exemption under the Income Tax Act 1961, extended by an additional year.  It means that startup companies established by the year 31^st March 2025 will be eligible to avail the exemption u/s 80 IAC.

This extension creates a one-year opportunity for recently formed startups. They can take advantage of the tax relief, potentially fostering additional entrepreneurship and business development within the specified timeframe.

80IAC of the Income Tax Act 1961 is the provision that allows recognized startups to get 100% tax exemption for 3 consecutive financial years out of 10 years of its incorporation. This is, indeed, one of the most important benefit of startup India registration.

CRITERIA FOR AVAILING EXEMPTION U/S 80IAC

• The entity should be DPIIT recognized startup
• Only a private limited or a limited liability partnership is eligible for tax exemption.
• The startup should have been incorporated on or after 1^st April 2016 but before 31^st March 2025.
• Turnover should be less than INR 100 crores in any of the previous financial years.

Tax exemption under Section 80IAC is a significant benefit for startups in India. It helps them to reduce their tax liability and reinvest the savings into their business. However, it is important to note that the approval for tax exemption is discretionary. It is based on the evaluation of the startup’s concept, innovativeness, scalability, and potential for growth and employment generation. Therefore, it is crucial for startups to put together a compelling pitch deck and video that highlights their strengths and potential to get the exemption U/S 80IAC.

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