CBDT clarifies on eligibility of small Start-ups to avail tax holiday

Aug 23, 2019 | by Avantis RegTech Legal Research Team


The Central Board of Direct Taxes on August 22, 2019, has clarified that small startups with turnover up to Rs. 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961, which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation.

CBDT further clarified that all the start-ups recognised by DPIIT which fulfilled the conditions specified in the DPIIT notification did not automatically become eligible for deduction under Section 80-IAC. A start-up must fulfil the conditions specified in Section 80-IAC for claiming this deduction. Therefore, the turnover limit for small start-ups claiming deduction is to be determined by the provisions of Section 80-IAC and not from the DPIIT notification.

CBDT said that there was no contradiction in DPIIT’s Notification dated February 19, 2019 and Section 80-IAC because in para 3 of the Notification, it has clearly been mentioned that a start-up shall be eligible to apply for the certificate from the Inter-Ministerial Board of Certification for claiming deduction under Section 80-IAC, only if the start-up fulfils the conditions specified in sub-clause (i) and sub-clause (ii) of the Explanation of Section 80-IAC. Therefore, the turnover limit for eligibility for deduction under section 80-IAC, as per the DPIIT’s Notification is also Rs. 25 crore.


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