Clause 41 of the Finance Bill 2023 proposes to amend Section 80-IAC of the Income Tax Act 1961 to extend the deadline for incorporation of eligible start-ups for exemption (100% deduction) from April 1, 2023 to April 1, 2024.
To be eligible for the Section 80-IAC tax break, a qualifying new start-up must be formally established as a legally recognised entity on or before March 31, 2023. It has been proposed to move the deadline or terminal date for establishing eligible start-ups from 31 March 2023 to 31 March 2024 in order to claim a deduction under Section 80-IAC.
1. The existing provisions of section 80-IAC of the Income Tax Act, among other things, provide for a deduction of an amount equal to 100% of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of ten, beginning from the year of incorporation, at the assessees’ option, subject to the condition that,
i) its total annual turnover does not exceed 100 crore rupees,
(ii) it possesses a ‘certificate of eligible business’ issued by the Inter-Ministerial Board of Certification, and
(iii) it is incorporated on or after April 1, 2016, but before April 1, 2023.
2. It is proposed to amend the provisions of section 80-IAC of the Income Tax Act to extend the period of incorporation of eligible start-ups to April 1, 2024, in order to further promote the development of start-ups in India and provide them with a competitive platform.
3. This amendment will become effective on April 1, 2023, and will apply to the assessment year 2023-24 and subsequent years.