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Startup India Guide Part 3 with Rahul Sharma

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Published on 16 Jul 2020 / In Startup in India

Startup India Guide Part 3 with Rahul Sharma

CERTIFICATE FOR THE PURPOSE OF SEC-80 IAC TAX EXEMPTION:

Eligibility Criteria for applying for Tax exemptions
The entity should be a recognized Startup
The Startup should have been incorporated after 1st April, 2016
Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded Rs. 25 crore (BUDG.2020-100CR.).
Should not be formed by splitting up or Reconstruction of a business already in existence
Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC

TAX BENEFITS TO STARTUP REGISTERD WITH DPIIT (DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE )
Startups incorporated on or after 1st April 2016 can apply for income tax exemption. The Inter-Ministerial Board validates the innovative nature of the business for granting Income Tax Benefits and is constituted by representatives from DPIIT, DBT, and DST.
DPIIT-Recognised Startups may apply to IMB (The Inter-Ministerial Board) for the following benefits:
IMB (The Inter-Ministerial Board) setup by Department of Industrial Policy and Promotion
Section 80 IAC: Income Tax exemption for 3 out of 7 years(BUDG.20-10YEAR)

Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)
ANGEL INVESTOR
They are investors who usually provide private equity or second-round funding for growing, profitable small businesses who need money to continue to grow. After family and friends, as well as the small business owner, provide the seed money for start-up companies, the companies then have to turn to either debt or equity financing in order to survive and move forward.

The investor has an average returned income of at least INR 25 LAKH in the last three years or has a net worth of at least INR 2 CRORE on the last day of the preceding financial year.

where a Startup issues its shares to any angel investor in consideration of funding received from the investors at a price exceeding the fair market value of the shares of the Startup, any excess over the fair market value (i.e. premium) is not taxed in the hands of the Startup post this amendment.

Capital gains tax exemption:
To boost the startup ecosystem in India, a long-term capital gains exemption up to INR 5 million is provided, if the amount equal to capital gain arising from the sale of capital assets is reinvested in the units of a notified fund set up for Startups for a period of at least three years.

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