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Tax holiday only for startups with turnover up to Rs 25 crore: CBDT

As specified in Section 80-IAC of the Income Tax Act, 1961, these startups will receive deduction for “100 per cent of income” for three out of seven years from the year of its incorporation, the Board said in a statement.

By: ENS Economic Bureau | New Delhi | Updated: August 23, 2019 3:54:49 am
AICTE, UGC, JEE, UGC circular, Indian books for engineering Clarification on Section 80-IAC of I-T Act

Only startups with turnover of up to Rs 25 crore will continue to benefit from tax holiday provisions specified under the country’s income tax regulations, clarified the Central Board of Direct Taxes (CBDT) on Thursday.

As specified in Section 80-IAC of the Income Tax Act, 1961, these startups will receive deduction for “100 per cent of income” for three out of seven years from the year of its incorporation, the Board said in a statement. The clarification comes following confusion over a Department for Promotion of Industry and Internal Trade (DPIIT) notification in February stating entities with turnovers of up to Rs 100 crore would be considered to be startups. All startups recognised by DPIIT do not automatically become eligible for the deduction under this section, said CBDT.

“A startup has to fulfill the conditions specified in Section 80-IAC for claiming this deduction. Therefore, the turnover limit for small startups claiming deduction is to be determined by the provisions of Section 80-IAC of the I.T. Act and not from the DPIIT notification,” stated the release. CBDT said there is no contradiction in DPIIT’s February 19 notification and Section 80-IAC because the notification “clearly” mentions that a startup shall be eligible to claim deductions under this section “only if” it fulfills certain conditions.

“Therefore, the turnover limit for eligibility for deduction under section 80-IAC of the I-T Act, as per the DPIIT’s notification is also Rs 25 crore,” it stated.

Section 80-IAC defines eligible start-ups as those incorporated on or after April 1, 2016 with a turnover not exceeding Rs 25 crore in the year of deduction. These startups are also required to have a certificate from the Inter-Ministerial Board of Certification.

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