Tax Benefits of Section 80-IAC Under The Income Tax Act, 1961

In the dynamic landscape of India's start-up ecosystem, the Government's initiatives often serve as catalysts for growth and innovation. Section 80-IAC of the Income Tax Act, 1961, among these provisions, emerges as a pivotal mechanism enabling recognized start-ups to claim substantial tax exemptions and bolster their financial footing. Let's delve deeper into the contours of this provision and the process involved in leveraging its benefits.

What is Section 80-IAC?

Section 80-IAC represents a cornerstone for eligible start-ups recognized by the Department for Promotion of Industry and Internal Trade -DPIIT to achieve significant tax exemptions. Instituted on April 1, 2017, this provision facilitates a 100% tax deduction for three consecutive profitable years, acting as a vital incentive for start-ups within the Indian entrepreneurial landscape.

What is the Eligibility Criteria?

Claiming the 80-IAC deduction necessitates adherence to specific eligibility criteria:

- Possession of a DPIIT certificate

- The entity should be a Private Limited Company (PLC) or Limited Liability Partnership (LLP)

- Incorporation after April 1, 2016

- Eligibility to claim deductions for three out of the initial five years post-incorporation

- Origination as an independent entity, not stemming from a split or reconstruction of an existing business

What is the application Process?

Leveraging the benefits of Section 80-IAC involves a systematic application procedure:

1. Start-up India Portal Login

Initiate the process by creating a Start-up India login and applying for the DPIIT recognition certificate via the Start-up India registration process.

2. Form Submission

 Within the portal, access the 'Claim Tax Exemption' section and furnish the required details:

   - Start-up name

   - Date of incorporation

   - Incorporation/registration number

   - Business address and location

   - Nature of business (LLP or PLC)

   - DIPP number

   - Contact details (phone number, email ID, and PAN number)

3. Document Submission

 Alongside the form, submit vital documents in PDF format:

   - Memorandum of Association (for PLC) or Limited Liability Partnership Deed (for LLP)

   - Board Resolution (if applicable)

   - Certified balance sheet and Profit and Loss statements by a Chartered Accountant (CA)

   - Financial statements and Income Tax Returns for the past three years or since incorporation

   - Link to a video pitch of the start-up and a pitch deck in PDF format

Conclusion:

Post-submission, the DPIIT evaluates the application and provided documents, extending an outcome within a timeline averaging between 3 to 9 months. During this period, monitoring the application progress through the Start-up India portal's dashboard becomes crucial.

Section 80-IAC of the Income Tax Act, 1961, stands as a testament to the government's commitment to fostering the growth of recognised start-ups by reducing their tax liabilities. Navigating the procedural intricacies empowers these entrepreneurial ventures, providing them a supportive environment to thrive and innovate within India's rising start-up landscape.

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