Empowering Innovation: Tax Exemptions For Startups In India And Bhaskar Initiative

6th February, 2025 - 6:07 am Categories: TAX 0 Comments

What is start-up India?

“Startup India” the leading ingenuity of the Administration of our nation, envisioned to increase the growth in startup culture and build an influential and comprehensive environment for modernization and entrepreneurship in the nation. This initiative was launched on 16th January 2016, it introduced several agendas with the objective of helping entrepreneurs, making the country of employment generators rather than being a nation of job seekers.[1]

Eligibility of the startups to get recognition by DPIIT.

According to the Startup India Action Plan, the new startups have to work according to the explanation mentioned in the  G.S.R. notification 127 (E)  only those startups are deemed fit. [2]Below written conditions shall be fulfilled by startups in order to get benefits under the Startup India Scheme:

1. The company should not have completed ten years from the time of its embodiment/registration.
2. The company should be a Private Limited Company or Limited Liability Partnership or Partnership firm.
3. The annual turnover of the corporation should not exceed 100 crores in any financial year from its embodiment.
4. The company that is formed should not be incorporated by dividing the same company into parts or by rebuilding an existing corporation.
5. The company should be incorporated after April 1, 2016.

TAX EXEMPTIONS FOR STARTUPS.

In Section 80 IAC.

As mentioned, this section was introduced on 01/04/2017. This facility permits the appropriate startups to take a 100% tax deduction of tax returns for 3 consecutive years. Section 80- Income Tax Act 1961 gives important tax enticements to corporations, LLP (Limited Liability Partnerships) that fall as startups affianced as creative, developmental activities, and enhanced goods and services. These provisions are made to strengthen the new ventures and startups with ascendable business ideas that have a higher potential in job and wealth creation by agreeing to deduct 100% of their profits.[3]

Since the total amount of the tax to be paid becomes, nil startups don’t have to pay advance tax. Documents required for getting the above benefits are:

1. Memorandum of Association for private companies and LLP deed for LLPs.
2. Board resolutions.
3. Annual Financial Statements.
4. Income Tax Returns.
5. Video Presentation as mentioned in the guidelines.
6. Section 56 exemption certificate.[4]
7. Exemption from Long Term Capital Gains

Section 54 EE has been added to the Income Tax Act of 1961 which allows the exemption for the startups which fall under the guidelines of DPIIT.[5]If the gain or part of such gain has been invested in the fund advised by the Central Government in the time period not exceeding 6 months from the time when that asset is transferred.

The determined sum that can be invested in the long-term specified asset is Fifty lakhs. This kind of sum should be financed in a stated fund for the time of three year, and if the amount is withdrawn before the completion of 3 years, then the exemption would be rescinded in that time, in which the amount has been withdrawn.[6]

Tax exemption on Long Term Capital Gains for investment in Startups under Section 54 GB.

In the said section, if an individual or HUF after selling its capital property invests the profit amount in 50% equity shares of the eligible startups on condition that the person won’t sell the said shares for 5 years also would not transfer.[7]

The new BHASKAR initiative by Startup India?

Bharat Startup Knowledge Access Registry, (BHASKAR) is visioned as a one-stop digital platform the place in which diverse startup ecosystem stakeholders can effortlessly network with each other and work in partnership which helps in catalyzing the development and success of the startup environment all over the country. BHASKAR is launched on 10 Dec 2024.[8]

By providing this new place for networking, information sharing, and searchability, BHASKAR aims to the growth of entrepreneurs and platform users at each and every step, driving forward a ethos of innovation that helps in boosting the nation to the vanguard of worldwide entrepreneurship. To date, there are 4,88,045 i.e. (29 Dec 2024).[9]

What functionalities will be available to the startup founder?

BHASKAR’s new schemes are premeditated to encounter the exclusive demands of every user in the startup network. As a startup founder, you will enjoy the below-written features and functionalities:

1. Seamless Networking: It would create ease in the startup ecosystem which will help the users to network with each other and make a community that will foster growth and exchange of ideas.[10]
2. Personalized Dashboard: It is the first-ever platform in India that provides a personalized dashboard according to the needs of each individual startup owner or stakeholder.[11]
3. Comprehensive Support: All the users will have access to a wide range of services, within the ecosystem and will also be able to communicate with the officials as well as peers in for the comprehensive development of their organization more swiftly.[12]
4. Enhanced Visibility: The users will have unique identities with the help of profile cards which will help them stand out within the startup ecosystem, will create an ease to identify each other.[13]
5. Ease in Discovering: The startups will be discovered earlier and faster by different stakeholders in the system, like mentors, investors, and corporates, at starting it will work within the country and subsequently all around the world.

Conclusion

Startup India is a transformative initiative that fosters a culture of innovation and entrepreneurship while reshaping the Indian economy. A novel feature of this program is its focus on empowering first-time entrepreneurs with resources, networks, and financial incentives to navigate the challenges of building a sustainable business. This approach not only addresses unemployment but also promotes self-reliance and economic modernization.

In my opinion, the scheme has immense potential to drive substantial growth in India’s startup ecosystem. By providing tax benefits, easing compliance, and encouraging investments, Startup India creates an environment conducive to innovation and creativity. However, to fully realize its goals, greater focus is needed on streamlining access to funding and mentorship, especially in Tier II and Tier III cities, where entrepreneurial potential often remains untapped.

In conclusion, Startup India is a progressive step toward transforming India into a global startup hub. By nurturing new ventures with policy support, tax incentives, and a robust ecosystem, the initiative empowers entrepreneurs to generate employment and spearhead India’s journey toward becoming an innovation-driven economy.

Author: Utkarsh Ajmera, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

[1] About Startup India, alt, https://www.startupindia.gov.in/content/sih/en/about_us/about-us.html (last visited Jan 21, 2025).

[2] Notification – startup India, https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/198117.pdf (last visited Jan 21, 2025).

[3] Section 80, Income Tax Act 1991.

[4] Section 80-IAC – income tax, https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2016/Others/section80iac.htm (last visited Jan 21, 2025).

[5] Section 54EE, Income Tax Act 1991.

[6] Section 54EE, Income Tax Act 1991.

[7] Section 54GB, Income Tax Act 1991.

[8]‘Bhaskar Initiative’ (BHASKAR | Startup India) <https://www.startupindia.gov.in/bhaskar/home> accessed 21 January 2025.

[9] Ibid.

[10] Ibid.

[11]  Ibid.

[13] Bhaskar Initiative’ (BHASKAR | Startup India) <https://www.startupindia.gov.in/bhaskar/home> accessed 21 January 2025.