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Income Tax Exemption

The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion validates Startups for granting tax related benefits. The Board comprises of the following members:

  • Joint Secretary, Department for Promotion of Industry and Internal Trade, Convener
  • Representative of Department of Biotechnology, Member
  • Representative of Department of Science & Technology, Member

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

A DIPP recognized Startup shall be eligible to apply to the Inter-Ministerial Board for 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 1st April 2021, and

Start-up is 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.

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

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

For more details, refer to the Notification.