NEW DELHI: Indian startups with turnover in extra of Rs 25 crore might need to pay revenue tax although they could be eligible for the three-year tax vacation introduced by the federal government. That’s as a result of underneath tax legal guidelines, the edge for exemption stays at Rs 25 crore. It has not but been enhanced to Rs 100 crore consistent with the liberalised norms of the Division for Promotion of Trade and Inside Commerce (DPIIT).

Startups need the DPIIT and Central Board of Direct Taxes (CBDT) to take away the anomaly, mentioned individuals conversant in the matter.

“Readability is required urgently because the September 1 deadline to file returns is nearing,” mentioned the chief monetary officer of a tech startup.

Startups exceeding the turnover threshold of Rs 25 crore stand to lose out on the tax vacation and will need to cough up tax with curiosity.

“The completely different turnover thresholds specified for qualifying as an eligible startup within the DPIIT round vis-a-vis underneath revenue tax legislation is a mismatch and must be addressed on the earliest,” mentioned Vikas Vasal, nationwide chief (tax), Grant Thornton India.

Startups broadly get pleasure from two advantages underneath the Revenue Tax Act. Part 80 IAC permits 100% deduction in respect of income and features for any three out of seven consecutive years starting from the 12 months by which a startup is included. Nonetheless, solely an ‘eligible’ startup can avail of the profit topic to sure situations.

‘Discrepancy not Deliberate’
The situations say whole turnover mustn’t exceed Rs 25 crore and the Inter-Ministerial Board of Certification ought to endorse that the corporate is a startup. Part 56(2)(vii)

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(b) permits exemption from tax being levied on the share premium acquired in extra of the honest market worth, which stemmed from protests over the socalled angel tax.


The exemptions are topic to the startup assembly situations specified by the DPIIT in its February 19 notification, which had amended the definition of startups. An entity could be thought of a startup if turnover in any of the monetary years since incorporation or registration had not exceeded Rs 100 crore. Nonetheless, the revenue tax provisions haven’t been modified in accordance with this threshold. The DPIIT measures had been aimed toward guaranteeing a extra useful ecosystem for startups, which had been complaining in regards to the angel tax and different issues.

It’s seemingly that the discrepancy wasn’t deliberate, mentioned an individual conversant in the matter. “The federal government ought to clear this ambiguity,” mentioned the particular person. “They’ve taken many steps for startups.”

Amit Maheshwari, companion, Ashok Maheshwary & Associates LLP, concurred with this view. “This doesn’t appear to be the intention of the federal government,” he mentioned. “A clarification on this might assist startups.”

Vasal mentioned the federal government has rolled out many laudable measures to ease the burden for startups and added that extra concrete steps should be taken to keep away from tax and regulatory disputes that maintain arising repeatedly and result in unfavourable notion in regards to the enterprise setting in India.

The federal government views startups as a key supply of wealth creation and employment technology, and has been making an attempt to incentivise entrepreneurship by initiatives comparable to Startup India.