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CBDT’s Clarification to Avail Tax Holiday

Published on August 23, 2019
Current context: CBDT (Central Board of Direct Taxes) clarified that small start-ups with turnover up to Rs. 25 crores, a condition specified in Section 80-IAC of the Income Tax Act, 1961 will continue to get the promised tax holiday.
CBDT’s Clarification to Avail Tax Holiday
  • The tax holiday for small startups provides a deduction for 100% of the income of an eligible start-up for 3 years out of 7 years from the year of its incorporation.
  • A start-up recognised by DPIIT (Department for Promotion of Industry and Internal Trade) has to fulfil the conditions specified in Section 80-IAC for claiming this deduction.
  • The turnover limit for small start-ups to be eligible for deduction is to be determined by the provisions of Section 80-IAC of the Act and not from the DPIIT notification.
  • Section 80-IAC contains a detailed definition of the eligible start-up which, provides that a start-up shall be eligible for the deduction, if
    1. It is incorporated on or after 1st April 2016.
    2. Its turnover does not exceed Rs. 25 crore in the year of deduction, and
    3. It holds a certificate from the Inter-Ministerial Board of Certification.


Q.1 Section 80-IAC of the Income Tax Act, 1961 was recently in the news for which context?
a. Insolvency and Bankruptcy Code related norms
b. Foreign direct investment
c. Angel tax provisions
d. Start-ups tax holiday eligibility

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