Control the Currency with Policy Bazaar: Income Tax Guide For Start-ups
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Updated date : 27 June 2019
Contrary to popular belief, start-up ventures are not quite the one giant celebration that they are cracked up to be.
Ask any person who has ever been associated with a start-up, and a whole new side to the story comes to the surface, consisting of a lot of necessary evils that no start-up venture could ever avoid—which includes taxation.
But where there is a problem relating to any tax-related issue, there is the expertise of Policy Bazaar that is always there to help you wade through the murky waters of the taxation process with ease.
Income Tax for Startups
The start-ups that are able to fulfil the below mentioned criterion will be considered as eligible start-ups:
- Established as a LLP (Limited Liability Partnership) or Company
- Established between 1st April 2016 and 1st April 2021 (Increased the last date to 2021 in Finance Act 2018)
- Rs. 25 crore is the maximum turnover of the business
- Should be certified by the Inter-Ministerial Board of Certification as an Eligible Business. It means that the business idea should be focussed on innovation, deployment, development or commercialisation of new services, processes or products that are technology-driven or intellectual properties.
- Should not be formed by reconstruction or splitting up of an already existing business.
Eligibility for Startups Income Tax India
There were several incentives announced by the Government in Budget 2016 for Income Tax levitation on Start-ups in India. In Budget 2017, these incentives were further enhanced for the benefit of individuals who are interested in starting their ‘start-ups’. .
Brief Idea about Incentives related to Income Tax for Start-ups:
In Budget 2016, the Government announced 100% Tax Deduction for eligible start-ups u/s 80-IAC. Under this newly launched scheme, all the eligible start-ups formed in-between 1st April 2016 to 1st April 2019 can get 100% tax deduction for any Income Tax paid for any 3 subsequent years.
These 3 subsequent years can be chosen from any of the first 7 years by the start-up at its own discretion.
All the start-ups who are eligible for these tax deduction benefits and want to claim the benefits of tax incentives need to:-
- Maintain Separate Accounts Books for Eligible Business
- provide the Audit Report in Form 10CCB along with Income Tax Return (ITR)
- Get the Accounts audited by a CA (Chartered Accountant)
Start-ups and Taxation: How Does It Work?
Start-up companies are subjected to a whole of taxes, most of which are not even known to a rookie who has just entered the playing field. But with some guidance and a whole lot of convenient comparison options and support from Policy Bazaar, nothing is too obscure for long.
There are essentially the following three types of taxes that a start-up company needs to be registered for, which are as follows:
Tax Payable by
Service provided to a customer/work done on behalf of another person/organization
Gross turnover above Rs. 9 lakhs
By March 31 of every year
Value Added Tax (VAT)
Governed by respective State legislation
Gross turnover above Rs. 5 lakhs
15th of every month
Central Sales Tax (CST)
Governed by Central Sales Tax Act, 1956
No compulsory limit; compulsory post any inter-state sale
20th of every month
Now, these three are the taxes that a start-up is liable to pay to the Income Tax Department timely by the above-specified dates. Other important dates that all start-up heads need to remember are:
- October 30—last date for submission of the annual financial statement, complete with Registrar of Companies (RoC).
- September 30— the last date to file the Income Tax Return (ITR) for the company. The ITR is mandatory to be filed by every single company, irrespective of whether or not any business transactions have been carried out in the financial year by the company in question.
Essentials for a Start-up
To hit the ground running, there are a couple of things that every start-up venture must keep in mind at all times. Some of these include, but are not limited to:
- Accounts: It is absolutely imperative to always maintain a black and white record of any and every kind of business transaction ever made by the company. These not only act as proof to support your claims in your company’s annual financial statement but also aid you to have the upper hand if and when an argument rears its head. Payments toward raw materials obtained from other corporate establishments and the salaries of employees working in your start-up are the most crucial ones for which an up-to-date record must be maintained.
- Timely filing of ITR: Always, always file your Income Tax Return on time, if not before. It is extremely important for any and every company—start-up or not—to file their respective ITR. If the deadlines for submitting ITR forms are not observed by companies, they are liable to pay 1 percent interest per month from the last date of filing to the actual date of filing. An extra amount is also levied as fine for being late.
- For companies whose gross turnover exceeds Rs. 40 lakhs in a single financial year, it is mandatory for them to undergo periodic audits, as mentioned in the LLP Act.
- RoC must be submitted every single year by the company to the Ministry of Corporate Affairs, failing which the company may even be forced to shut down completely.
Policy Bazaar and You
At Policy Bazaar, we have one simple aim: to make the investment as easy and efficient for you as possible. Irrespective of whether our customer is an individual or a large corporate organization, our goal is and always has been to ensure complete security of your money so that you get the most out of your every single penny you spend.
With our subsection known as Paisa Bazaar, you can now attain complete financial advice in a single place, by the ones you truly trust. Join hands with us and enjoy finance, simpler than it has ever been.
Paisa Bazaar: The New Way to Finance
With the up and coming of our branch Paisa Bazaar, all things related to finance have been simplified like never before to increase layman understanding by leaps and bounds. Your money is the fruit of your hard labour, and you must know full well where to invest it to gain maximum profits.
Or if you live at the other end of the spectrum and are looking to secure funds for an idea or your organization, you too will easily find everything you need at Paisa Bazaar. From helping you apply for all the various kinds of loans that exist, to help in keeping you informed about all the happenings in the finance industry, we at Policy and Paisa Bazaar have you covered.
Compare, Calculate And Choose
We understand that making a choice is hard, even if it is something as simple as choosing between red and blue. And when it comes to picking out the policy that is just right for you, or a bank to apply for a loan to, one may experience an immense amount of stress. Hence, to ease that stress, Policy Bazaar offers you convenient methods to compare all the different policies that there are for the category you are looking for, all in a single place.
Similarly, should you be looking for a bank to get a loan from, one whose interest rates and all other particulars sit right with you, hop on to Paisa Bazaar and compare all the various options available to you until you find whatever it is that you were looking for. Paisa Bazaar will also help you calculate your loan eligibility, which goes a long way in aiding the bank to make the decision about whether to grant you a loan or not.
Other tools available for your convenience are:
- EMI Calculator—calculate your monthly instalments well in advance that helps you plan ahead and always stay on top of your financial situation.
- Fixed Deposit, Recurring Deposit Calculator—this tool helps you calculate the maturity amount of your fixed deposit and your recurring deposit. All you need to do is enter the amount deposited, the rate of interest and just let us do all the heavy lifting.
- Compound Interest Calculator—this tool, like the name, suggests, help you calculate the total compound interest payable by you for any loan that you may have taken.
- Gold Rate—Paisa Bazaar has an entire section dedicated solely to the rates of gold and its constant fluctuations. This is especially helpful to those investors/individuals who are planning to avail gold loans, or for those who are looking to buy gold in some quantity.
Learn With Us
We believe that knowledge indeed is power. Believing that, we aim to provide our customers and clients with all kinds of textual resources that we possibly can, including tips and tricks for efficient business, all the latest developments in the industry, and so and so forth.
We have separate web pages dedicated to news, infographics, as well as credit and CIBIL reports, to name a few. There is a wide range of topics covered in the infographics department, ranging from financial planning to taxation matters, and everything in between. If your query is more generic, feel free to browse through our section of Frequently Asked Questions (FAQs) and chances are, you shall most definitely find a similar question and our expert-provided answer to the same.
Reliable Customer Support, Always
We understand how important financial matters are, and we also understand that problems may arise anytime. Hence, we at Policy Bazaar offer a wide variety of ways using which you may contact us at any given time. You may call us on our toll-free contact number 18002087878, or even reach us through WhatsApp Messenger, without spending a single penny.
For Non-Resident Indians, we have a separate contact number using which they may reach out to us anytime, for whatever reason. Be it a query, a complaint or maybe you are in need of a suggestion—never hesitate to reach out to us at any time.
Should you ever need to register a complaint regarding any of our services, you may submit a ticket on our website, and we shall get back to you in next to no time to resolve your issue as quickly as we possibly can. Also, if you feel like you have a question that requires urgent assistance, ask it to us through our website.
With You At All Times
To ensure seamless connectivity with all our customers, we also offer our full range of services on mobile devices as well. All you need to do is download our application onto your mobile device, and that’s it—carry us with you, wherever you go.
FAQs About Income Tax For Startups :
1. What all start-ups can be qualified as a “Start-up” under Government schemes?
A Registered Partnership Firm or a Private Limited Company or Limited Liability Partnership (any of these 3 entities) will be considered as a start-up if –
- It is up to 7 years from its date of registration. However, for the start-ups in the field of Biotechnology, this period is up to 10 years, and
- If the turnover of a particular company hasn’t exceeded Rs 25 Crore for any of the fiscal years, and
- If the company is working towards development, innovation, commercialization or deployment of the new products, services or processes that are technology-driven or intellectual properties.
- Any of the 3 entities should not be reconstruction or have been set up by splitting up of a corporation already in existence.
- Any public Limited proprietorship or company will not be considered as a start-up.
2. For how long, a ‘Start-up’ will be recognised as so?
An entity would be recognised as a 'start-up' till:
- It has completed 7 years from the date of its registration/incorporation (in the event of Start-ups in the field of Biotechnology, the tenure shall be up to 10 years), OR
- If its turnover for any of the fiscal years has gone beyond INR 25 Crore; OR
- DIPP should be intimated of any such case within 21 days.
3. What all documents can work as supporting documents while submitting an application to register a “Start-up”?
An individual can submit/upload any one of documents mentioned below along with her/his registration application:
Letter of funding with an amount figure supporting at least 20% in equity by any Angel Fund, Incubation Fund, Accelerator, Private Equity Fund or Angel Network. Please make sure that these institutions need to be duly registered with SEBI (Securities and Exchange Board of India).
The Letter of Funding should also endorse the innovative nature of the proposed business.
4. Would I receive any certificate for successful registration? Would I be able to download it?
Yes, you would be able to download a verifiable system-generated certificate of recognition, once your registration is successful.
5. Would I be allowed to register my entity as a “Start-up” even if it doesn’t have a PAN?
You can submit a valid copy of the published patent as a supporting document, in case you don’t have a PAN.
6. Can I update two mobile numbers in my registration form?
It is generally advised to provide only a single mobile number of the authorized agent at time of registration. The portal & the mobile app use the updated mobile number to send an OTP to complete registration and authentication process by the user.
7. Is there any prescribed format for getting a letter of recommendation?
Yes, a prescribed format needs to be followed to get a recommendation letter. One can find the prescribed format on Startup India portal.
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