Starting a business in India? The government provides several tax benefits to encourage startups and ease their financial burden. Below is a simple breakdown of key tax advantages available to eligible startups.

1. Tax Holiday (Section 80-IAC) – 100% Profit Deduction

• Who can claim? DPIIT-recognized startups registered as a Private Limited Company or LLP.
• What’s the benefit?
  • 100% tax exemption on profits for three consecutive years within the first ten years of incorporation.
  • Previously, only startups incorporated until March 31, 2024, could avail of this benefit. Now, this has been extended to March 31, 2030.

2. Exemption from Angel Tax (Section 56(2)(viib))

• What’s Angel Tax? If a startup raises funds from an investor at a price higher than the fair market value (FMV), the extra amount is taxed as “Income from Other Sources.”
• Who is exempt? DPIIT-recognized startups with total share capital & premium not exceeding ₹25 crore.
• What’s the benefit? Startups don’t have to pay tax on funds received from Indian investors above FMV.

3. Carry Forward of Losses (Section 79)

• Who can benefit? Startups that incur losses within the first seven years of incorporation.
• What’s the condition? Even if there’s a change in shareholding, the losses can still be set off as long as at least 51% of original shareholders remain.

4. Lower Corporate Tax Rate

• For regular domestic companies: 22% corporate tax (if no other exemptions are claimed).
• For new manufacturing startups (set up after October 1, 2019, and starting operations before March 31, 2024): 15% tax rate.

5. Other Benefits

✅ Self-Certification for Compliance: Startups can self-certify compliance with labor & environmental laws for 3-5 years.
✅ Faster Patent & Trademark Registration: Startups get a 50% rebate on trademark fees and 80% rebate on patent filing fees.

Final Thoughts

These tax benefits help startups reduce costs, improve cash flow, and grow faster. However, startups must ensure they meet eligibility conditions and file the necessary documents on time to claim these benefits.