What is a Tax Exemption?
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Tax Exemption Certificate
Benefits
- 100% Profit Deduction
- Exemption from Advance Tax
- Lower Tax Burden
- Streamlined Application Process
Benefits of this program
- 100% Profit Deduction: Eligible startups can claim a full deduction on profits for three consecutive assessment years, significantly boosting cash flow and profitability.
- Exemption from Advance Tax: With no tax liability under this provision, startups are relieved from paying advance tax, simplifying financial planning.
- Lower Tax Burden: By reducing taxable income, Section 80-IAC eases financial stress during the critical early stages, enabling startups to allocate resources more effectively for growth and innovation.
- Streamlined Application Process: Startups can apply online with ease, benefiting from a hassle-free, no-cost procedure that encourages wider adoption of this exemption.
Understand Section 80-IAC
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.
Importance of 80-IAC
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.
Eligibility Criteria for Section 80-IAC Tax Exemption
- Entity Type: Must be a Company, LLP, or registered partnership firm.
- DPIIT Recognition: Requires a DPIIT Recognition Certificate.
- Incorporation Period: Registered between April 1, 2016, and March 31, 2025.
- Age Limit: Claimable within 10 years of incorporation.
- Originality: Not formed by splitting/reconstructing an existing business (exceptions under Section 33B apply).
- Assets: Should use new plant and machinery, not transferred from another business.
- Turnover: Annual turnover must not exceed ₹100 crores.
- Objective: Focus on employment generation, wealth creation, and financial growth.
- Innovation: Engage in developing or improving innovative products, services, or processes.
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Tax Exemption Certificate
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