Startup Tax Exemption U/s 80IAC
Online DPIIT Application FilingUnder the Startup India Scheme of the government of India, start-ups may apply for tax exemption for three years within ten years of their establishment. We assist the start-up in obtaining tax exemption u/s 80IAC.
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Tax Exemption for Startup under Section 80IAC
Newly established and incorporated startups often need more financial resources during their initial stages of operations, which negatively impacts their sales and profits. The situation worsens further when a huge chunk is paid in taxes out of the minimal income they earn. Only a little profit is left behind for reinvestment. Realising this struggle, the government of India introduced Section 80-IAC and Section 56 of the Income Tax Act, 1961, which allows tax exemption for three consecutive financial years out of ten from the date of incorporation to eligible startups recognised by the DPIIT
Eligibility / Checklist for 80IAC Startup Tax Exemption
The 80IAC Startup Tax exemption criteria depend on factors like DPIIT Recognition, the age of the startup, and its overall business turnover. Also, the innovation factor in its products or services is crucial for claiming the tax exemption. We have explained all the 80IAC tax exemption eligibility criteria below. Ensure all eligibility criteria are satisfied before applying for tax exemption under section 80IAC.
Eligible Business Types
Not all the business structures are eligible for Startup Tax Exemption, and The startup must be a Company, LLP, LLP, or a registered partnership firm. Startups established as any other business structure, such as sole proprietorship, are not eligible under the Startup India Scheme of DPIIT.
Startup Recognition by the DPIIT
The Department of Promotion of Industry and Internal Trade (DPIIT) must recognize startups, and the startup must obtain a DPIIT Recognition Certificate. The process of obtaining Startup Recognition is online and easy. Team setindiabiz helps obtain Startup Recognition.
Incorporated after 1st April 2016
Any startup incorporated/registered after 1st April 2016 and not older than ten years can avail of the tax exemption u/s 80IAC. The DPIIT Startup Tax Exemption is available only for companies with all Indian Promoter. The companies or LLPs with FDI are not eligible.
New and Original Entity
The applicant must be a new incorporation and should not have been formed by splitting up or reconstructing an existing business. The plant and machinery used by the startup must be new and should not be old or a transfer from an existing plant and machinery already in use.
Turnover not exceeding Rs.100 crores.
The turnover of the applicant startup must not exceed Rs. 100 crores in the Financial Year for which the deduction is claimed. The objective of the Startup India initiative is to provide growth opportunities to budding startups and not to established businesses.
Innovation & Employment Generation
The startup must have a portfolio of innovative products, services, or processes. Or the development of new or innovative products, services, or processes with the primary aim of financial growth, employment generation, and wealth creation.
Timeline for 80IAC Recognition
1-2 Days
Analysis of the Startup
Our experts will analyse the eligibility criteria of the startup based on the documents submitted and the filled questionnaire. They shall review the pitch deck and video presentation in the first stage
1-3 Days
Drafting of Documents
For the DPIIT Recognition, we will then draft the necessary documents for the signature of the authorised representative. We also draft the justification for the grant of tax exemption to the startup in line with the For the DPIIT Recognition, we will then draft the necessary documents for the signature of the authorised representative. We also draft the justification for the grant of tax exemption to the startup in line with the guidelines.
3-4 Days
Filing of Application
We then submit the application under section 80IAC for startup tax exemption, which is authenticated with the DSC of the authorised representative.
4-7 Days
Keep Track of Application
After applying for the startup tax exemption grant under Section 80-IAC and Section 56 of the Income Tax Act, 1961, we have to keep track of the application, and in case of any resubmission remarks or clarification, the same needs to be adequately addressed.
Documents Required for Startup India Registration
The table below contains a complete list of Startup India Registration Documents. These documents can be categorised into mandatory and additional documents. Additional documents are submitted on the basis of your Startup’s stage. Let’s understand the stages of Startups before we proceed to the documents required for Startup India Registration.
Mandatory Documents
- Certificate of Incorporation
- Business PAN
- Applicant’s Aadhar
- Letter of Applicant’s Authorisation
- An Active Mobile Number
- An Active Email Addres
Note?
We recommend you send the soft copies of documents and filled questionnaires shared with you. We will verify the information and legal documents sent to us. Please contact us for further clarifications.
Process of Obtaining Section 80IAC Startup Tax Exemption
After getting Startup recognition, a Startup may apply for a tax exemption under section 80 IAC read with section 56 of the Income Tax Act. If the application is approved, the Startup can avail of a tax holiday for three consecutive financial years out of its first ten years since incorporation. Wondering how to apply for tax exemption online under Section 80IAC of the Income Tax Act? We have provided an easy stepwise guide for you to understand and navigate.
Step - 1
Documentation
Section 80IAC registration process for Startups is completely application-based. So, the chances of its approval depend on the accuracy of the documents submitted. At Setindiabiz, we provide full documentation assistance as part of our 80IAC registration service. You can get your documents drafted and verified by experts to avoid any hassle later.
Step - 2
Login to the Startup India Portal
After preparing all the necessary documents, the next step is to visit the official website of Startup India. In the main menu, navigate to the “Recognition” option and choose “Apply for Tax Exemptions” from the dropdown. You will be redirected to a page where you can access the 80IAC Application after signing into your account.
Step - 3
Fill out the Application form
Fill out the 80IAC form with necessary details like name, address, and business activity of the startup. The applicant must provide his name and contact information as well. Since the DPIIT recognises the startup, you must submit the DIPP number, incorporation and PAN details.
Step - 4
Upload all necessary attachments
After filling out all the details, upload the necessary documents. These include the MOA or LLP Deed, copy of annual accounts and ITR, video link, pitch deck, etc. A complete list of these documents is given in the section above.
Step - 5
Enter the details of the authorised signatory
Lastly, provide basic details of the applicant or authorised signatory to complete the form. These include his name and designation in the startup. Usually, the authorised signatory is one of the company’s directors or an LLP / Firm’s partners.
Step - 6
Submit the Application
Once all the details have been filled out correctly, you can submit your application to the Startup India Portal. The Department will process the application in a few days. If all details and documents are found to be correct, the application will be approved by the Department.
Step - 7
Get an 80IAC Tax Exemption Certificate.
After the application is approved, the DPIIT will grant the applicant startup an 80IAC tax exemption Certificate. This certificate will conclusively prove the eligibility of the startup to claim Startup Tax Exemption under Section 80IAC.
Tax Benefits for Startups Under Section 80IAC
Startup India Tax benefits under Section 80IAC ensure that your Startup gets 100% exemption for three consecutive years. How exactly would this contribute to the growth and success of a Startup? The Section 80IAC benefits listed below will provide clear insights. These benefits work phenomenally across the spectrum for all kinds of recognised startups in India.
100% Tax Deduction
Recognised Startups receive a 100% tax deduction on profits. This eliminates any tax payment requirement during the crucial initial phases.
Tax Exemption for Startups
Startup tax benefits under 80IAC extend for three consecutive financial years after DPIIT recognition. The applicant can choose these 3 FYs at will.
Reduced Tax Burden
Startup Tax Deductions u/s 80-IAC help cope with the heavy tax burden. New businesses usually face this burden during the starting stages.
Easy & affordable to claim
DPIIT Startup Tax Exemption under Section 80IAC can be claimed through a quick, cost-effective online application process.