Budget 2025 for startups: In order to boost ease of doing business for startups, Finance Minister Nirmala Sitharaman in her budget speech on Saturday proposed extending the benefits provided under Section 80-IAC of the Income Tax Act to startups for another period of five years. The benefits will be available to eligible startups incorporated before April 01, 2030.
Section 80-IAC, introduced in April 2017, allows eligible startups to claim 100 per cent tax deductions on profits for any three consecutive years.
Startups registered with DPIIT (Department for Promotion of Industry and Internal Trade) under the Commerce Ministry’s Startup India programme can apply for tax exemption under section 80 IAC. Post clearance for tax exemption, startups are eligible for tax holidays out of their first 10 years since incorporation.
Importantly, only private limited or a limited liability partnership firms are eligible for tax exemption under Section 80IAC. Moreover, turnover should be less than Rs 100 crore in any of the previous financial years.
Launched in January 2016, over 1.6 lakh startups are registered under the Startup India programme and 3,604 startups have been given tax exemptions, as per the Startup India portal.
Sitharaman on Saturday had also announced a new Fund of Funds for startups to be set up with a fresh contribution of Rs 10,000 crore in addition to the existing government contribution of Rs 10,000 crore.
The new announcements add to the measures undertaken by the government recently for startups. In one of the biggest announcements during last year’s budget, Sitharaman had abolished the controversial Angel Tax for startups, treating investments received by startups from external investors as income from other sources and then subjecting it to a 30 per cent tax rate.