Introduced on April 1, 2017, Section 80-IAC of the Income Tax Act, 1961, is a key provision aimed at supporting startups in India. It allows eligible startups to claim a 100% tax deduction on profits for three consecutive years from the date of incorporation.
This section specifically benefits startups with innovative and scalable business models, emphasizing activities like product development, service improvement, and technological advancements. By easing tax burdens, Section 80-IAC fosters employment generation, wealth creation, and overall growth, making it a cornerstone for nurturing India’s startup ecosystem.
Supports Startup Growth: Section 80-IAC of the Income Tax Act, plays a vital role in nurturing startups during their early and critical stages. By offering significant tax holiday, it reduces financial burdens, enabling startups to channel their resources toward scaling and innovating rather than worrying about tax liabilities.
Encourages Tax Compliance: This provision incentivizes startups to adopt transparent and responsible tax practices. By offering tax relief, it motivates young entrepreneurs to remain compliant, reducing instances of tax evasion and promoting a culture of accountability within the startup ecosystem.
Boosts Economic Growth: The tax incentives under Section 80-IAC stimulate economic development by attracting domestic investments in startups. This focus on scalable and innovative business models benefits both the startups and the broader economy, driving growth in emerging sectors.