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.
Category: Government Schemes Current Affairs