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AGA

Tax

Holiday.

Background
To provide impetus to new entrepreneurial ventures, business profits earned by eligible startups carrying on eligible business are entitled to claim tax holiday of any 3 block years out of first 10 years of the startup

Who can
avail Tax Holiday?

Applicability

  • Applicable to eligible startups carrying on eligible business.
  • Only business profits are exempt.
  • Business profits for any 3 consecutive years during the first 10 years of startup

Eligible Business

Means a business carried out by an eligible start-up engaged in:

  • Innovation
  • Development or improvement of products or processes or services or
  • A scalable business model with a high potential of employment generation or wealth creation;

Eligible Start-up

Means a company or an LLP engaged in eligible business which fulfils the following conditions, namely:—
  • It is incorporated on or after the 1st day of April 2016 but before the 1st day of April 2022;
  • The total turnover of its business = Up to INR 100 crore in the relevant FY; and
  • It holds a tax holiday certificate granted by the CBDT.

Additional Conditions

 
  • Such startup should not be formed by splitting up, or the reconstruction, of an existing business.
  • Such startup is not formed by the transfer of used (second-hand) plant or machinery.

Deemed unused plant or machinery in the following cases:

  • Already used + outside India + by anyone except the assessee
  • Imported into India
  • No depreciation claimed previously under the provisions of the IT Act by anyone prior to the installation by the assessee
  • Up to 25% of total value of plant or machinery is previously used (second-hand).

Procedure to apply for tax holiday

  • File Form – 1 with the CBDT, along with the prescribed documents (see below).
  • Prescribed documents include:
  • Copy of MOA,
  • Copy of LLP/partnership deed,
  • Copy of board resolution,
  • Annual accounts of the startup for the last three financial years,
  • Copies of income-tax returns for the last three financial years, wherever applicable.
  • CBDT, upon receiving the same may issue the desired certificate or reject the application specifying the reasons of rejection.
  • (insert the form template in appendix and may be link it or write page number for hard copy readers)

Revocation of tax holiday

  • In case it is found that any certificate under this section has been obtained on the basis of false information, the CBDT reserves the right to revoke such certificate or approval and it shall be deemed to have been never issued/granted.

Key Takeaway

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* not being a company in which the public are substantially interested as defined in section 2(18) of the Act.