What's included in Budget 2023 for startups?

 1.     Extension of the date of incorporation for eligible start-ups

Section 80-IAC of the Income tax act, 1961 provides tax holidays for an eligible start-up engaged in an eligible business.

An eligible start-up can claim a deduction of 100% of its profits derived from eligible businesses for 3 consecutive assessment years out of 10 Assessment Years.

The 10 assessment years have to be reckoned from the year in which the start-up is incorporated.

To be eligible for a deduction under this section, a start-up must have been registered on or after January 4, 2016, but before March 31, 2023.

This limitation period has now been increased by an additional year, until 31-03-2024. So, all eligible start-ups registered on or before 31-03-2024 would also be eligible for benefits under this section.

 

2.     The extension of the time period for carry forward and set-off of losses to 10 years from 7 years at present

Under section 79, if all of the company’s shareholders continue to own shares, the requirement of continuity of at least 51% shareholding is not applicable for an eligible start-up for setting off the carried-forward losses.

The losses incurred by an eligible start-up can be carried forward and set off against the profit for a period of 7 years from the year in which the entity was incorporated.

The Budget 2023 has proposed to increase this period to 10 years from the year in which the entity got incorporated.