Startup India, an initiative of the Indian government, aims to establish a robust ecosystem that fosters innovation and the growth of businesses within the nation. The objective of the government is to enable the expansion of enterprises via design and innovation. The Department of Promotion of Industry and Internal Trade (DPIIT) oversees Startup India.
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Note: Any entity or business formed by splitting up or reconstruction shall not be considered as startup.
Once the companies are registered as startup under DPIIT, then they can apply for tax exemption u/s 80-IAC of Income tax act. Section 80-IAC helps the startup companies to increase the growth in the early phase of their business.
A deduction of 100% of profits and gains by an eligible startup from eligible business is allowed for any 3 consecutive Assessment years out of 10 years beginning from the year in which the eligible startup is incorporated.
As per Section 80-IAC, eligible startup means the following
The business of eligible startup should be as follows.
Section 80-IAC benefits are available for the eligible startups which fulfils the following conditions.
Example: Radha Krishna private limited is incorporated on 24 th November 2020 and it is engaged in eligible business i.e, Sale of innovated products. It was recognized as startup under DPIIT and got the 80IAC exemption w.e.f FY 2020-21 itself. Now the profits of Radha Krishna private limited is as follows
|1||2020-21||Loss of Rs 5 lakhs|
|2||2021-22||Loss of Rs 2.5 lakhs|
|3||2022-23||Profit of Rs 1 lakhs|
|4||2023-24||Profit of Rs 6 lakhs|
|5||2024-25||Profit of Rs 25 lakhs|
|6||2025-26||Profit of Rs 35 lakhs|
|7||2026-27||Profit of Rs 45 lakhs|
|8||2027-28||Profit of Rs 60 lakhs|
|9||2028-29||Profit of Rs 25 lakhs|
|10||2029-30||Profit of Rs 20 lakhs|
As the profit of Radha Krishna private limited is high during FY 2025-26, 2026-27 and FY 2027-28, it is recommended to opt for Section 80-IAC deduction during the above 3 years