Eligibility for Start-up Recognition

• Start-ups must be recognized by the Department for Promotion of Industry and Internal Trade.
  
• The company must be incorporated as a private limited company or LLP.
  
• The turnover should not exceed ₹100 crore in any financial year since incorporation.
  
• The entity should be working toward innovation, development, or improvement of products or services.
  
• Recognition is required to avail certain tax exemptions under corporate tax laws.
  

Tax Holiday Under Section 80-IAC

• Eligible start-ups can claim a 100 percent tax deduction on profits.
  
• The deduction is available for any three consecutive years out of the first ten years from incorporation.
  
• The entity must be incorporated between April 1, 2016, and March 31, 2025.
  
• Deduction is available only if the business involves innovation and scalable operations.
  
• The exemption is not automatic and requires application and approval.
  

Applicable Corporate Tax Rates

• Recognized start-ups that are domestic companies are generally taxed at 25 percent if turnover is up to ₹400 crore.
  
• New manufacturing start-ups may opt for 15 percent tax under section 115BAB.
  
• Start-ups not opting for special schemes can pay tax at standard corporate rates.
  
• Concessional tax regimes under section 115BAA at 22 percent are also available.
  
• Once a concessional scheme is chosen, it cannot be changed later.
  

Other Tax Incentives

• Exemption on long-term capital gains under section 54GB is available for reinvestment in start-ups.
  
• Investments made above fair market value are exempt under section 56(2)(viib) for eligible start-ups.
  
• Accelerated depreciation and carry forward of losses are permitted under relaxed norms.
  
• Certain deductions under sections 35 and 80JJAA can be claimed if not under concessional regime.
  
• Tax incentives are also available for R&D expenditure.
  

Compliance and Regulatory Requirements

• Start-ups must maintain proper books of accounts and file tax returns annually.
  
• Audit may be required if turnover exceeds specified limits.
  
• Approval for tax holiday must be obtained through proper filing and documentation.
  
• All deductions and exemptions must be reported in the income tax return.
  

Non-compliance may result in loss of benefits or penalty under the Income-tax Act.