Income Tax Benefit: Budget 2024 Extends Date of Startup LLP/Company Incorporation for S. 80IAC Exemption by One More Year [Read Finance Bill]

Eligibility criteria for LLP/Company incorporation for 80IAC exemption increased to one more year by the Interim - Budget 2024
Budget 2024 - Interim Budget 2024 - Income Tax Benefit - Budget 2024 for startup - Tax Exemption - taxscan

On February 1st, Finance Minister Nirmala Sitharaman introduced the Interim Budget 2024 in Parliament. An important feature is the prolongation of the deadline for the incorporation of Startup LLP/Company to qualify for the Section 80IAC exemption under the Income Tax Act, 1961, extended by an additional year.

The amendment in the Finance Bill proposed to extend the date till 2025. The amendment states as follows;

“In section 80-IAC of the Income-tax Act, in the Explanation, in clause (ii), in sub-clause (a), for the figures “2024”, the figures “2025” shall be substituted.”

Read More: Union Budget 2024: Key Highlights of Interim Budget Speech

Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

  1. The entity should be a recognized Startup
  2. Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
  3. The Startup should have been incorporated after 1st April, 2016

As per this Finance Bill 2024, the incorporation can be made till 2025 for the income tax exemption. Section 80-IAC under Income Tax Act, guarantees a full deduction of 100 percent of profits derived from eligible business activities which benefit the startups for their growth. It is supported by the government.

Read More: Interim Budget 2024: FM proposes Corpus of One Lakh Crore for R&D Investments with Fifty Year Interest Free Loan

Summary: Startup companies or Limited Liability Partnerships ( LLPs ) established by the year 2025 will be eligible to avail the Section 80IAC exemption as per the provisions of the Income Tax Act. This exemption provides significant benefits, allowing these entities to enjoy specific deductions outlined in the tax regulations.

Subscribe Taxscan Premium to view the Judgment

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates