In what could be called as surprise gift for startups, the criteria for claiming 100% deduction of profits has been relaxed by govt in form of an amendment to the Finance Bill 2018, passed in Lok Sabha yesterday.
In past, startups were allowed 100% deduction of profits for any 3 out of 7 years from the year of incorporation. However, to avail this incentive, the startups were required to comply with condition which stipulated that the turnover cannot exceed ₹25 crore in 7 years from the date of incorporation.
In an amendment to Finance Bill 2018, the govt. has now linked turnover limit directly to year of claim. According to this, the compliance condition is relaxed largely to the effect that turnover should not exceed prescribed limit for the year for which 100% deduction is claimed by the startup.
The above development was first reported in The Hindu.
For last couple of years, government along with few other bodies are mulling over to create more relaxed environment for startups in India. It is to be noted that in this week only, two big relaxations have been given to startups as beside relaxing the criteria for 100% deduction of profits for startups, India’s market regulator Securities and Exchange Board of India (Sebi) is also planning to allow startups to list on the small and medium enterprises (SME) platform of the stock exchanges as an opportunity to raise capital apart from usual private equity and angel investment funding route.
Earlier, in financial budget of this year, time for claiming a tax holiday/exemption by eligible startups has been extended till April 1 2021.
However, despite of all this, one thing that disgust startups in India is that, in 2015, government withdrew the tax exemption given to company/startups doing research and development or startups based on R&D, which is a great setback for innovation in the country.