{"id":1196,"date":"2019-08-16T10:55:47","date_gmt":"2019-08-16T05:25:47","guid":{"rendered":"https:\/\/rzplearn.com\/?p=1196"},"modified":"2025-02-26T12:15:52","modified_gmt":"2025-02-26T06:45:52","slug":"tax-incentives-exemptions-startup-india-2019","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/tax-incentives-exemptions-startup-india-2019\/","title":{"rendered":"Tax Incentives &#038; Exemptions to Startups in India [2019]"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The <a href=\"https:\/\/razorpay.com\/learn\/register-startup-india-procedure-eligibility\" target=\"_blank\" rel=\"noopener noreferrer\">Startup India<\/a> campaign was launched in 2016 in order to increase <a href=\"https:\/\/razorpay.com\/learn\/what-is-entrepreneurship\/\">entrepreneurship<\/a> in the country. Through this campaign, various aspects of running a startup, such as a bank financing, tax incentives, simplifying the process of registering the business and other benefits were targeted, in order to make running a business more appealing to India\u2019s youth.\u00a0<\/span><\/p>\n<p>Under the start-up India initiative, eligible businesses will have to get recognised as Startups by Department for Promotion of Industry and Internal Trade (<a href=\"https:\/\/www.startupindia.gov.in\/content\/sih\/en\/home-page.html\" target=\"_blank\" rel=\"noopener noreferrer\">DPIIT<\/a>) to enjoy tax benefits, easier compliance and much more.<\/p>\n<p><span style=\"font-weight: 400;\">In this article, we will discuss the various tax incentives and exemptions that are applicable to the startups in India under this plan, as of 2019.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Eligibility to be part of Startup India<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">New businesses must meet the following conditions to be considered eligible for DPIIT startup recognition:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A company that has been incorporated for less than 10 years qualifies as a startup.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The annual turnover of these companies should not be more than Rs 100 crores for any of the financial years since its incorporation<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The company should basically aim towards development, innovation, deployment, or commercialization of any new products, services, or processes that are either driven by technology or intellectual property<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The company cannot be created by splitting up an existing company to make a new one<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The company can be registered as either a limited liability partnership, registered partnership or a <a href=\"https:\/\/razorpay.com\/learn\/what-is-a-private-limited-company\/\">private limited company<\/a><\/span><\/li>\n<\/ul>\n<p><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: GST Rules And Benefits For Startups In India&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332543,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;9&quot;:0,&quot;10&quot;:1,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/learn\/gst-rules-benefits-startups-india\/\">GST Rules And Benefits For Startups In India<\/a><\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Tax exemptions under Startup India<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Under the Startup India program, eligible businesses can enjoy the following tax incentives and exemptions:<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">3 year tax holiday in a block of 7 years<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Under section 80IAC, any startup that has been incorporated after 1 April 2016 can get a 100% tax rebate on its profits for a total period of 3 years within a block of 10 years. However, if the company\u2019s annual turnover exceeds Rs 100 crore, then the tax rebate is not valid. Only private limited companies or LLPs are eligible for tax exemption under this section. Also, the company should be a DPIIT recognised startup.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This tax exemption has been put in place to help businesses meet their capital requirements while setting up.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Exemption from tax on long-term capital gains<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">To make things easier for startups, a brand new section known as Section 54EE has been added to the Income Tax Act. Under this section, startups are exempt from long-term capital gains tax. However, this is only applicable if the capital gains that have been invested in are a part of the fund notified by the Central Government within a total period of 6 months from the date of the actual transfer of the asset. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, under this rule, the maximum amount of capital that a company can invest in the long-term specified asset is Rs 50 lakhs. The amount then has to be invested in the fund for at least 3 years. If the investor ends up withdrawing the amount before the 3 years are up, then the amount becomes taxable.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Tax exemptions on investments above the fair market value<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">If an eligible startup makes an investment, the government will exempt the tax on the investment above the fair market value. This includes a range of different investments such as funding secured by resident <a href=\"https:\/\/razorpay.com\/learn\/angel-investor-meaning-definition\/\">angel investors<\/a> and funds that are not registered as venture capital ones. Additionally, investments that are made by incubators above the fair market value are also exempt under this plan.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Tax exemptions to individual\/HUF on long-term capital gains from equity shares<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">There is already an existing provision known as Section 54GB under which there are tax exemptions on any long-term capital gains on the sale of property only if these gains are further invested into enterprises. These enterprises must be small or medium ones, as defined under the Micro, Small and Medium Enterprises Act of 2006. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">T<\/span><span style=\"font-weight: 400;\">his provision has now been amended in order to include eligible startups into the mix. As a result of this, if an individual or a HUF decides to sell their property and then invests the money they get from the sale to subscribe to a minimum of 50% or more of an existing startup, then they are exempted from tax on these long-term capital gains. However, this is only applicable as long as the shares are not sold again within 5 years or even transferred to someone else. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, the startups have to use the amount that has been invested in order to purchase assets. They should not transfer the purchased asset to someone else for at least 5 years.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The advantage of these tax incentives and exemptions is that they will boost the general investments made in startups, which will then promote their expansion and growth.<\/span><\/p>\n<p><em>Also read: <a href=\"https:\/\/razorpay.com\/learn\/income-tax-rules-regulations-startups-india-2019\" target=\"_blank\" rel=\"noopener noreferrer\">Income Tax Rules for Startups<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here are the various tax exemptions and incentives available under Startup India.<\/p>\n","protected":false},"author":151156456,"featured_media":1036,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3435],"tags":[1707,1948,1949],"class_list":{"0":"post-1196","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-gst-tax-government","8":"tag-startups","9":"tag-tax","10":"tag-tax-benefits"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156456"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=1196"}],"version-history":[{"count":8,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1196\/revisions"}],"predecessor-version":[{"id":16237,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1196\/revisions\/16237"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/1036"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=1196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=1196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=1196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}