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Tax Benefits for Startups in India

Tax Benefits for Startups in India
  • 11th Oct 2019 |
  • 2,688

Tax-saving tips are popular among everyone because nobody wants to miss out on enjoying tax benefits that are legally permissible. This is true for entrepreneurs as well. Which businessman wouldn’t like to save money when paying taxes? The government always strives to provide tax benefits to entrepreneurs, especially start-ups, because they can significantly contribute to the economy of India. If you own a company in India, then knowing income tax-saving tips will help you plan your budget more accurately.

There are multiple tax benefits available to entrepreneurs. Here are the ones that cannhelp you save on taxes:

  • No tax for the first three years

The Government of India offers 100% tax exemption to the start-ups for the first three years. This gives new entrepreneurs time to build a business with added budget, which they otherwise would have to pay as taxes. However, only companies that are registered with Department of Industrial Policy and Promotion (DIPP) are eligible to claim this benefit. Moreover, the start-up has to be a company that works in the field of intellectual property and pushes innovation and development of services and products related to the same. The only tax the start-up has to pay is the Minimum Alternate Tax (MAT), which is calculated on the revenue reflected on the ‘book profit’ of the company.

  • 20% tax exemption on capital gain

If you are an entrepreneur and are wondering how to reduce tax in India, you will be relieved to know that the government offers benefits on capital gain tax. The capital gain tax is the income tax companies have to pay on the profits earned from company stocks. Even though the earnings from stocks, shares, and bonds are taxable, start-ups get a tax benefit of 20% on the capital gain.

  • No tax on ‘Angel Investment’

A start-up often fails to earn the trust of new investors as they have no track-record, which makes it harder for them to raise funds. Without significant investments, new entrepreneurs cannot continue to develop their business. Angel investors can help them in such a scenario. They negotiate the terms and interests payable by the entrepreneurs. The Government of India has announced that ‘angel investments’ are tax-free. Hence, start-ups can now collect the funds they require from angel investors without having to worry about added taxation. If you are thinking of how to save tax in partnership firm more effectively and use the investment towards further development of the company, you must keep this point in mind.

  • Presumptive tax benefit

A start-up that has a turnover of under INR 2 crore is eligible to enjoy the benefits of the ‘Presumptive Tax Scheme.’ Under this, the company is not required to maintain any book of account, which relieves the pressure on entrepreneurs.

With these tax benefits, tax planning for companies becomes easier. It leaves more funds in their account to innovate and develop newer ideas. The goal of the government is to
help start-ups in building self-sustaining businesses.

Invest in Term Insurance now to save tax

Read Here for More Related Articles:

Kotak e-Term Plan


  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492


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