Tax Holiday for Startups extended to startups with turnover upto INR 25 crore

In a clarification issued by the Central Board of Direct taxes, a tax holiday has been extended to only those startups with a turnover of INR 25 crore.?

What has happened?

  • Startups in India have the potential to provide a large number of jobs to the youths and also improve the nation’s technological edge in crucial areas like digital electronics, artificial intelligence, and Internet of things, among others.
  • To encourage startups, the Indian Government had decided to provide a tax holiday to all small startups in the country.
  • As per the government, all startups under Section 80 IAC of the Income Tax Act were allowed 100% deduction of income for 3 out of 7 years from the year of the startup’s incorporation.
  • As the definition by the Department of Promotion of Industry and Internal Trade (DPIIT), a small startup had been defined as a startup having a turnover less than Rs 100 crore.?
  • However, the CBDT, which is responsible for collecting taxes has disagreed with the DPIIT’s view and claims that since the scheme is meant to support a small startup, a turnover limit of up to 25 crores is justified.
  • The CBDT claims that mere recognization by the DPIIT of a small startup of what fulfills the conditions specified in the DPIIT notification do not automatically become eligible for the tax deduction under Section 80-IAC of the Act.




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