Income Tax-exemption for Start-up under Sec.80 IAC Income Tax Act

Startup India: 80 IAC Tax exemption:

Under the Startup India Action Plan, start-ups that meet the definition as prescribed under G.S.R. Notification 127 (E) are eligible to apply for recognition under the program.

Under Section 80-IAC, start-ups who gets approval from  Inter-Ministerial Board of Certification constituted by DPIIT  will get 100% Income tax-exemption for three consecutive assessment years.

Eligibility Criteria for Startup Recognition:

• The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership
• The entity should be a recognized Startup
• The Startup should have been incorporated after 1st April, 2016
• Turnover should be less than INR 100 Crores in any of the previous financial years
• An entity shall be considered as a startup up to 10 years from the date of its incorporation.
• The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth.

An entity formed by splitting up or reconstruction of an existing business shall not be considered a "Startup". The entity shall cease to be a Startup on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds one hundred crore rupees. 

80 IAC Tax exemption - Application Process

An eligible Startup shall make an online application to DPIIT (Department for Promotion of Industry and Internal Trade) with the following 

• a copy of Certificate of Incorporation or Registration
• a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation. 

The Inter-Ministerial Board of Certification constituted by DPIIT after review of application may call for such documents or information and making such enquires, as it may deem fit and finally shall recognise the eligible entity as Startup or reject the application by providing reasons.

After getting recognition a Startup under Startup India Action Plan, the business entity can apply for Tax exemption under Section 80 IAC of the Income Tax Act.

Angel Tax Exemption (Section 56) & Income tax Exemption (Sec.80 IAC)

Angel Tax Exemption for stat up under Section 56 of the Income Tax Act (Angel Tax) is different from Tax-exemption for start-up under Sec.80 IAC Income Tax Act.