Startup Tax Exemption - 801AC
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Introduction
Startup Tax Exemption - 801AC
Section 80IAC of the Income Tax Act 1961 is a special section in respect of the specified business. It came into effect on 1st April 2017. According to this section, an eligible assessee that is making profits can claim 100% tax deductions for any three consecutive years. People commonly refer to it as an 80IAC deduction for eligible startups.
The aim of this provision is to decrease the evasion of taxes. As a result, this tax benefit encourages young entrepreneurs in India to become honest taxpayers.
Who can apply for 801AC tax exemption?
- You have your DPIIT certificate;
- You have your DPIIT certificate;
- You can claim tax deduction for any three consecutive years out of the first five years of incorporation; and
- The startup claiming 80 IAC tax exemption has to be an original entity, not formed after a split or reconstruction of an existing business.
Benefits
Benefits Of Start-Ups Under Start-Up India Scheme
Process
Process to claim 80IAC tax exemption
Step 1: Log in to startup India portal
The first step in claiming a tax deduction is to create your startup India login. Then, you need to apply for DPIIT recognition certificate. You can do so, by following the steps of the startup India registration process.
Step 2: Fill in the details
After logging in to the portal and selecting ‘claim tax exemption’ you need to fill in the form. Name of Startup; Date of Incorporation; Incorporation/registration number; Address and Business location; Nature of Business (whether LLP or PLC); DIPP number; and Contact Details (namely Phone No., E-mail ID, and PAN number of entity).
Step 3: Submit documents required for 80 IAC tax exemption
1. Memorandum of Association (if PLC) 2. Limited Liability Partnership Deed (if LLP) 3. Board Resolution (if any) 4. CA certified balance sheet and Profit and Loss statements; 5. Financial Statements for either the past 3 years or for all the years since incorporation; 6. Income Tax Returns for either the past 3 years or from the date of incorporation; 7. Link to a video pitch of the startup; an 8. Pitch Deck in PDF format.
Conclusion
Once you have submitted the form for section 80 IAC tax exemption, you need to wait for the approval. As a part of the process, the department will go through all the documents and information provided by you, and give an appropriate outcome. As a result of which, the timeline for to get a response or approval from the DPIIT is around 3-9 months. Although, you can keep a track of your application by visiting the startup India portal and clicking on the ‘Dashboard’ of your profile.
Document Checklist
Documents Required for Startup Tax Exemption - 801AC
Name, address, and nature of business of the startup
Date of Incorporation Number and CIN / LLPIN
Permanent Account Number (PAN) of the startup
Contact Information of the Startup
Copy of the Board Resolution
Copies of Income Tax Returns
Faq
Frequently Asked Questions (FAQ)
Section 80-IAC is a benefit offered by Central government to eligible startups by way of providing tax deduction of an amount equal to 100 percent of the profits and gains derived from eligible business.
Eligible start-up means a company or a LLP engaged in eligible business which fulfils the following conditions,
- It is incorporated on or after 01-04-2016 but before 01-04-2023.
Total Turnover does not exceed 100 crores in the previous year relevant to the assessment year for which deduction is claimed
- It holds a certificate of eligible business from the Inter-Ministerial Board of Certification.
Eligible business for the purpose of Section 80 IAC means a business carried out by an eligible start-up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.
As per section 80 IAC of income tax Act, an eligible business is a business that involves innovation, development, deployment, or commercialisation of new products, processes, or services driven by technology or intellectual property.
No, having a DPIIT certificate is only one of the reasons why you are eligible to apply for the tax exemption. There are more eligibility criteria that you need to fall under, to get tax exemption under section 80IAC of the Income Tax Act.
An eligible startup means a company or a limited liability partnership that:
a. is incorporated on or before 1st April 2016 but before 1st April 2023 (as amended in the Union Budget 2023);
b. total turnover does not exceed Rs. 25 crores; and
c. holds certificate of eligible business from the Inter-Ministerial Board of Certification.
No, the entities certified by DPIIT must apply separately in the Startup India portal to avail exemption under section 80-IAC.
