On February 1st, Finance Minister Nirmala Sitharaman introduced the Interim Budget 2024 in Parliament. An important feature is the prolongation of the deadline for the incorporation of Startup LLP/Company to qualify for the Section 80IAC exemption under the Income Tax Act, 1961, extended by an additional year.
The amendment in the Finance Bill proposed to extend the date till 2025. The amendment states as follows;
“In section 80-IAC of the Income-tax Act, in the Explanation, in clause (ii), in sub-clause (a), for the figures “2024”, the figures “2025” shall be substituted.”
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Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.
Eligibility Criteria for applying to Income Tax exemption (80IAC):
As per this Finance Bill 2024, the incorporation can be made till 2025 for the income tax exemption. Section 80-IAC under Income Tax Act, guarantees a full deduction of 100 percent of profits derived from eligible business activities which benefit the startups for their growth. It is supported by the government.
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Summary: Startup companies or Limited Liability Partnerships ( LLPs ) established by the year 2025 will be eligible to avail the Section 80IAC exemption as per the provisions of the Income Tax Act. This exemption provides significant benefits, allowing these entities to enjoy specific deductions outlined in the tax regulations.
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