Start ups to get tax exemptions |
The Indian government is set to ease its norms to allow more startups to benefit from provisions under the income tax law that allows 100% deduction up to 100% of the profits and gains. The move follows encouraging signs from the government decision to simplify the rules for angel tax exemption, with 508 startups already benefiting. Government significantly eased the rules and allowed tax exemption for startups whose shares are subscribed at a hefty premium, which is in excess of the fair market value. DPIIT has set its sights on section 80(IA)C of the income tax law as the benefits have flowed to only a handful of startups. The provision, drafted as part of the Startup India initiative, provides 100% tax exemption on profits earned by eligible businesses for three consecutive assessment years out of seven years starting from the year in which the startup was incorporated. The current provisions have been interpreted in a very strict manner, resulting in less than 100 startups being certified by the panel of officers from DPIIT and science and technology and biotech departments. The rules are now being reviewed and a simpler dispensation is being proposed.
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