Tax Holiday For Startups Extended Till April 2021

Although, this year budget has very little to be rejoiced by Indian startup ecosystem as startups are not given its due importance by FM in Budget 2018. Nevertheless, there is little positive news for startups via this year budget, and this is — time for claiming a tax holiday/exemption by eligible startups has been extended till April 1 2021.

Earlier, eligible startups could claim deduction for three out of seven years, if incorporated between April 1, 2016 and April 1, 2019. This has been extended by two more years to April 1, 2021.

Although startups can now avail income tax exemption for three years in a block of seven, many industry leaders, investor groups and startups feel there is little to celebrate in this development since most startups take a lot more time to just to break even.

Moreover, only those startups that have been incorporated after April 1, 2016 are eligible for getting 100% tax rebate under this provision, which will further narrow down the number of startups that can fall within its scope.

In fact, according to a statement by Department of Industrial Policy and Promotion (DIPP), government has selected only 67 startups out of the 671 startups that they were considering for income tax exemption.

Rohan Bhargava, Co-founder of CashKaro.com said, “This year’s budget is more focused on driving growth in the traditional sectors of the economy and spend seems directed towards infrastructure, telecom, health, education. These are overall very relevant areas for our country to develop further and will have far reaching impact on industry and ease of living. However, the Budget lacks specific initiatives to directly boost Startups and corporates. We were hoping to see more details on simplification of tax structures, allocation of Startup India Fund, dissolution of Angel tax, extending tax holiday period, but many such topics have been completely left out by the Budget and perhaps may be addressed in the Annexure.”

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