List of Tax Benefits for Startups in India- India is growing and is already the third-largest supporting economy to start building. It is developing day by day and will soon become the most prominent center for a technology startup in the world. To encourage and sponsor startups in India, the government has announced several programs that can benefit from benefits, one of which is the Emerging India Program. The main objective of this initiative is to create an environment that helps startups in the country and push for entrepreneurship. Here’s a look at the tax benefits these startups can take advantage of and how they can use these programs to fuel their growth.
Define startup
Below is a list of conditions that must be fulfilled, to define the company as a startup in India in accordance with India’s emerging policy:
1. It should have started five years before the initiative was formed.
2. The annual turnover of the project must not exceed 25 crores.
3. The company must be a leader in its field of expertise and must push for innovation.
4. It must be a new project and not one formed by splitting or renewing an enterprise earlier.
Tax exemptions
Startups programs help entrepreneurs by providing them with many tax benefits, and those that operate as private limited companies, limited liability partnerships, or partnership companies may also be eligible for other benefits according to the schemes available to them.
The first three years
Startups are eligible for a 100% tax exemption except for the alternative minimum tax (MAT) that will follow 18.5% of the profits, as stated in the books, on profits for the first three years.
To take advantage of this feature, the startup company must be registered under the Department of Industrial Policy and Promotion (DIPP). It should also be one that pays for innovation and the development of new products and services related to intellectual property. Such interest helps startups as the cost of setting up is itself a huge financial burden for businessmen, and therefore, moving away without having to pay taxes for three years will help them to balance their expenditures and break-even sooner, leading to higher profits in later.
The money
Another benefit the government offers to help startups is the fund that has an initial set of INR 2500 crores and the final set of INR 10,000 crores lasting four years. This comes within the framework of the Fund Funds Benefit (FOF), which will act as a direct investment under the supervision of SEBI and will be applied only to startups registered under the supervision of DIPP. Since the financial shortage is the most prominent problem that companies face early in their journey, such a benefit comes as a welcome comfort for many and will serve as a great accelerator for the growth of such projects.
Capital gain tax
The companies collect the capital by sharing the shares, and the profits gained through participation in such transactions are known as the capital gains and thus are eligible for tax. Startups are exempt from 20% of their capital gains, forcing them to pay less taxes on profits gained through sales of stocks, bonds, and stocks.
Angel investment tax
Investments act as important sources of financing for entrepreneurs, but when the project begins, it may not be able to obtain investor confidence, and therefore may not be able to find a large number of brokers and investors willing to spare their money. Consequently, entrepreneurs have no choice but to contact the angel investors who negotiate with the project owner on terms related to interest and the amount payable. It has abolished the government in an attempt to help entrepreneurs get the capital they need, thereby making investments made by landlords not taxable.
The amendment of Article 56 (2) (7) (b) of the Income Tax Law gave entrepreneurs the right to issue shares at a rate higher than the value observed in the books to help them collect funds more easily.
Other provisions
In addition to these tax benefits, the government has introduced several provisions that help and support entrepreneurs in the country. Some are as follows.
• Funds of up to 500 crores have been earmarked for Al Inriya for self-employment projects to help support entrepreneurs belonging to the “Scheduled Tribe” and “Scheduled Sect” groups, as well as to help women entrepreneurs.
Reducing long-term capital gains from three to two years
Amend the Firearms Act to encourage entrepreneurship
• Hypothetical tax schemes for companies whose business volume is less than two crores in INR while these charts were available earlier for companies whose business number decreased to less than one crore in INR.
• Providing a staff savings fund for the first three years.
Indian government officials have realized that the best way to drive innovation forward is to help entrepreneurs tackle their tax problems. All of the above provisions help entrepreneurs to take advantage of tax benefits and access to funds, and in the long run, help them create self-sustaining companies.
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