The Department-related standing parliamentary committee for commerce in India has recommended easing the criteria for startups to avail benefits under the income tax law. The committee expressed concerns over the underutilization of Section 80-IAC of the Income Tax Act, 1961, which was introduced in 2017.
This section allows startups to claim a deduction of up to Rs 100 crore in profits for three consecutive years. However, according to the committee’s report, only 10.4% of the 98,119 recognized startups in India have applied for this exemption. Additionally, as of March 31, 2023, only 1,173 applicants have been granted the Certificate of Eligibility.
The committee highlighted that despite six years since the implementation of Section 80-IAC, only 1% of recognized startups have received the Certificate of Eligibility. This indicates a low level of utilization of the benefits provided under this section.
In light of these findings, the committee has suggested relaxing the eligibility criteria for startups to access these income tax benefits. This recommendation aims to encourage more startups to take advantage of the deduction and Promote the growth and development of the startup ecosystem in India. By making the criteria more accessible, the government hopes to stimulate greater participation and uptake of the tax benefits among startups, which in turn could support innovation, investment, and job creation in the startup sector.
