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Startup Tax Benefits 2023 | Updated tax benefits for Startups in India

Any company registered as a start-up is eligible to avail of all kinds of tax benefits. Keeping a record of the taxes and the following procedure is time-consuming. So, before a start-up owner proceeds to file taxes, it is important to know the tax exemptions they can avail of.

Latest Updates on Startup Tax Benefits: Startups concentrate on setting up their empire initially. A reason a lot of firms fail is that they run out of money when they require it. This is where keeping good records and filing your taxes will save you. The benefit of taxes is that one could save money, which might then be used to invest in growing the company. Another benefit would be when a company follows all regulations, and it would keep the good favor of customers and investors.

Latest Updates: Tax Benefits 2023

Nirmala Sitharaman, the finance minister of India, in the 2022 budget considers startup companies a vital aspect of the Indian economy. Henceforth, she has extended the benefits for the startups that function from April 1, 2016, to March 31, 2023. Previously the benefits were for the startups incorporated from April 1, 2016, to March 31, 2021. If a startup operates for ten years, it would be able to receive 100% Startup Tax Benefits on its profits for the first three years as long as its annual turnover does not exceed ₹25 crores in any given accounting period year.

Home Turned Office Benefits

It is fine if one who is planning to start a business from scratch registers their residential address as an office address. This can avail them of an exemption from property taxes and utility bills.

Health Insurance For Employees

While applying for health insurance, there can be a deduction that could be available under Section 80G. Contributions to specific emergency relief and charity groups are deductible under Section 80G of the Income Tax Act. However, Section 80G does not permit deductions for all donations. All contributions to specified funds are eligible for a deduction. Every taxpayer may claim this deduction, including people, businesses, and firms.

Benefits of Keeping All Bills

If one keeps all the bills, invoices and any form of financial receipts, they can avail of tax reductions and exemptions. This is proof for all the investors that the start-up is functional.

Presumptive Tax Deduction

According to the Income Tax Department, “To give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE. In this part, you can gain knowledge about various provisions of the presumptive taxation scheme of section 44AD, section 44ADA, and section 44AE. Meaning of presumptive taxation scheme As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account, and further, he has to get his accounts audited. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, 44ADA, and 44AE. A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the tedious job of maintenance of books of account and also from getting the accounts audited.”

Points to Remember on Startup Tax Benefits

According to the official website, certain points summarise the article. Given below is an excerpt from the official website to learn more about the Startup tax benefits that are available for any start-up:

The board shall validate startups for the Income Tax Exemption on profits under Section 80-IAC of the Income Tax Act:

A DIPP-recognized Startup shall be eligible to apply to the Inter-Ministerial Board for a full deduction on the profits and gains from business. Provided the following conditions are fulfilled:

  • A private limited company or a limited liability partnership,
  • Incorporated on or after 1st April 2016 but before 31st March 2023, and

Start-up is engaged in the innovation, development, or improvement of products or processes or services, or a scalable business model with a high potential for employment generation or wealth creation.

To apply for Income Tax Exemption on investments above fair market value received under Section 56 of the Income Tax Act:

A Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Act and consequent exemption from the provisions of that clause if it fulfills the following conditions:

  • it has been recognised by DPIIT under para 2(iii)(a) or as per any earlier notification on the subject 
  • the aggregate amount of paid-up share capital and share premium of the startup after the issue or proposed issue of shares, if any, does not exceed twenty-five crore rupees

Conclusion

Starting a business alone requires a lot of time, thinking, and resources. But start-ups with great ideas are flourishing quickly, contributing greatly to the Indian Economy. However, there are also numerous legal loopholes one might not be aware of. Also, as discussed above, there are numerous benefits as well! To know more about Startup tax benefits available, and other legal services, contact Vakilsearch – the legal is now simple.

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