TAX ADVANTAGES FOR INDIA’S START-UPS

A large increase in India’s entrepreneurial spirit has been observed in recent years, in part due to the government’s proactive efforts to promote innovation and economic growth. The government launched the STARTUP INDIA program, which aims to create an ecosystem that is supportive of businesses, to spark this trend. The variety of tax benefits offered to startups, intended to spur their growth and encourage innovation, is one of the key components of this strategy.

Definition of Startup

A business must satisfy the requirements listed below in order to be eligible for startup status under the Startup India policy:

– It must have begun no more recently than five years after the project was first introduced.

– The company’s annual revenues should not go over Rs. 25 crores.

– The business must be innovatively oriented and a leader in its industry.

– It should be a brand-new business, not a subsidiary of an older one or its rebirth.

Tax Benefits for Startups

Entrepreneurs who operate as private limited companies, limited liability partnerships, or partnerships may also be eligible for additional benefits based on the tax scheme accessible to them. The Startup Program assists entrepreneurs by offering them a number of tax perks.

First 3 Years

For the first three years, startups are exempt from paying taxes, with the exception of the Minimum Alternate Tax (MAT), which is calculated as 18.5% of the profit reported in the books.

Startups must register with the Department of Industrial Policy and Promotion (DIPP) in order to be eligible. This benefit enables new enterprises to balance their budgets and reach break-even faster, which ultimately results in larger earnings.

Government Funds

The government also offers a fund with a Rs. 2500 crore initial corpus and a Rs. 10000 crore final corpus lasting four years to assist startups. This falls under the Funds of Funds (FOF) advantage, which only applies to startups registered under DIPP and functions as a direct investment under the authority of SEBI.

Such an advantage comes as something that many people accept and will serve as something that happens quickly for the expansion of this type of work since the shortage of cash is the most obvious obstacle that companies confront at the beginning of their trip.

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