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Budget 2017 : Benefits for Start-Ups

Extension and rationalization of tax exemption for start-ups

The Startup India plan provided for exemption from taxes for a period of three years to eligible start-ups by way of section 80-IAC.  The section has now been amended to allow start-ups to take such exemption for any three consecutive years out of 7 years from the year that the start-up was set up in.
This will allow start-ups who arrive at profitability later in their life cycles, which is frankly all of them, to take benefit of the tax breaks allowed.

Carry forward and set-off of losses made easier for start-ups

  • Start-ups covered under section 80-IAC will be able to carry forward their losses and set them off against future profits even after changes in their voting pattern as long as all the shareholders of the company continue to hold shares in the company.
  • This allows start-ups to raise capital from new investors or indulge in Mergers and Acquisitions and still be able to take benefit of provisions of section 79 of the act. Other companies on the other hand have to ensure that at least 51% of voting power is retained by the same sat of shareholders to be able to carry forward losses and set them off against profits earned.
  • Period of MAT credit carry forward has been extended to 15 years from the existing 10, a similar carry forward for AMTs has also been proposed for non-corporate assesses.

With Contributions From Anshu Mehta, Ankit Sharma, Ayesha Jain, and Mansi Singhal

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