Tax Benefits for Startups in India: Every Entrepreneur Needs to Know

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3 years Ago

Tax Benefits for Startups in India | Niir.org

Tax Benefits for Startups in India: Every Entrepreneur Needs to Know

Following are the Tax Benefits that Every Startup can gain in India;

**1):- Tax holiday for startups in India for three years;**

To give every startup a much-needed boost, the government of India has proclaimed to provide a deduction of 100% tax impunities during the first three years of operation. Startups will get a 100% tax rebate if their annual turnover is not more than 25 crore for any financial year. Startup companies registered with the Department of Industrial Policy and Promotion (DIPP) and involved in the development, deployment, or commercialization of new products or services based on technology would be considered eligible for the three-year tax benefits provided by the government. Additionally, tax exemption for startups in India includes not paying any tax for profits except MAT (Minimum Alternate Tax) for eligible startups in the first three years.

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2):- They will get a 20% exemption on Capital Gains;

Capital gains are the kinds of taxes charged on profits gained from the sale of capital assets such as stocks and bonds. The Indian government has formulated a provision for an exemption of 20% capital gains tax.

3):- Taxes imposed by The Government on turnover;

Early, companies with a turnover of fewer than 50 crores per year had to pay 30 per cent tax, but now, medium and small level companies with a turnover of less than Rs. 50 crore have to pay a tax at a rate of 25 per cent. Moreover, the period of claiming profit linked tax exemption is now increased from 5 years to 7 years by the government. This step for tax exemption for companies in India would benefit roughly 6.67 lakh companies in the country.

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4):- The Employee’s Provident Fund (EPF) will be paid by The Government;

The Indian government will now provide an Employees’ Provident Fund (EPF) contribution of 8.33% for three years. Before this, the percentage of the contribution was 12% of the employees’ basic salary. This move will relieve many employers by cutting costs of startups by 12% for the straight three years, and it will provide opportunities to hire competent and qualified candidates because job security will be assured to candidates. Many companies have started registering themselves with EPFO to avail themselves of these benefits.

5):- Presumptive tax of The Government;

Each startup must maintain the books of account. It is not required for the entrepreneur to maintain books of accounts under the Presumptive Taxation scheme, so this will reduce the burden. In non-digital transactions, they must report profits of 8%, and in digital transactions, they must declare profits of 6%. Additionally, all the small businessmen with a turnover of up to Rs 2 crore can benefit from this scheme.

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**6):- Tax exemption for startups in India on investments above the fair market value by The Government;**

Taxes on investments above fair market value in eligible startups that have been continuously levied by the Indian government have been exempted. These investments comprise investments made by resident angel investors, family or funds that are not registered as venture capital funds.

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7):- Relaxation for carrying forward losses and set-off by The Government;

The income tax law of the country provides for the carrying forward and set off of business losses. This set off will be negated to any private company if there is a 50% or more than 50% change in the shareholding pattern of that company from the year in which they saw losses.

Through the startup India scheme, eligible companies can be recognized by the DPIIT as startups, which will grant them access to tax benefits, easier compliance, and faster IPR tracking.

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