I-5 Contents Start-up Reckoner 1 - Eligibility reckoner for tax holiday u/s 80-IAC I-27 Start-up Reckoner 2 - Turnover-limit linked compliances/ exemptions for a start-up which is private company I-54 Start-up Reckoner 3 - Turnover-limit linked compliances/ exemptions for start-up which is a limited liability partnership I-59 Start-up Reckoner 4 - Turnover-limit linked compliances/ exemptions for start-up which is a traditional/general partnership firm I-64 Start-up Reckoner 5 - Tax Benefits Available to DPIIT - Recognised Start-up Private Limited Companies based on their Turnover I-70 1 WHAT IS A START-UP 1.1 1 1.2 2 1.3 2 1.4 - 2 1.5 3 1.6 4 1.7 7
I-6 2 DISTINCTION BETWEEN START-UPS AND MSMEs 2.1 8 2.1-1 10 2.2 11 2.3 i.e. 13 2.4 14 2.5 14 2.6 15 2.7 15 2.8 16
3
3.1 17 3.2 18 3.3 20 3.4 22
WHAT IS THE CRITERIA FOR RECOGNITION OF START-UPS BY DPIIT
I-7 4 START-UPS ELIGIBLE FOR DPIIT - RECOGNITION 4.1 23 4.1-1 23 4.1-2 24 4.1-3 24 4.2 25 5 OPC AS A START-UP ENTITY 5.1 27 5.2 27 5.3 28 5.4 28 5.5 31 5.6 32 5.7 33 5.8 33 5.9 33 5.10 ` ` 34
I-8 5.11 35 5.12 35 5.13 35 5.14 36 5.15 36 5.16 36 5.17 36 5.18 36 5.19 - 36 5.20 37 6 INNOVATION/SCALABLE BUSINESS MODEL 6.1 38 6.2 38 6.3 41 6.4 - 45
I-9 6.5 - 68 6.6 88 6.7 142 6.8 151 7 START-UP ENTITIES NOT ELIGIBLE FOR DPIIT RECOGNITION 7.1 152 8 SOLE PROPRIETORSHIPS - WHETHER ELIGIBLE FOR DPIIT RECOGNITION 8.1 153 8.2 153 8.3 153 8.3-1 154 8.3-2 - 155 8.3-3 - 156
ENTITIES FORMED AS A RESULT OF AMALGAMATIONS/ MERGERS/DEMERGERS/ABSORPTION WHETHER ELIGIBLE FOR DPIIT
ENTITIES FORMED AS A RESULT OF COMPROMISE/ ARRANGEMENT - WHETHER ELIGIBLE FOR DPIIT RECOGNITION
I-10 9
RECOGNITION 9.1 157 9.1-1 158 9.1-2 158 9.2 158 9.2-1 159 9.3 159 9.3-1 160 9.3-2 160 10
10.1 - 162 10.2 162 11
DPIIT RECOGNITION 11.1 164 11.2 164 11.3 164 11.4 165
HOLDING & SUBSIDIARY COMPANIES - WHETHER ELIGIBLE FOR
I-11 11.4-1 166 11.4-2 166 11.4-3 168 11.4-4 169 11.4-5 172 11.5 173 11.6 173 11.7 173 11.8 174 11.9 174 12 JOINT VENTURES - WHETHER ELIGIBLE FOR DPIIT RECOGNITION 12.1 - 175 12.2 175 12.3 175 13 ENTITIES INCORPORATED OUTSIDE INDIAWHETHER ELIGIBLE FOR DPIIT RECOGNITION 13.1 179
I-12 14 ENTITIES WITH FOREIGN SHAREHOLDING/STAKEWHETHER ELIGIBLE FOR DPIIT RECOGNITION 14.1 181 15 ENTITIES FORMED BY SPLITTING-UP/RECONSTRUCTION OF EXISTING BUSINESS - WHETHER ELIGIBLE FOR DPIIT RECOGNITION 15.1 184 15.2 185 15.3 193 15.4 194 16 ENTITIES INCORPORATED WITH COMMON DIRECTOR/DP/PARTNER - WHETHER ELIGIBLE FOR DPIIT RECOGNITION 16.1197 16.2 197
I-13 17 PROCEDURE FOR DPIIT - RECOGNITION OF START-UP 17.1 200 17.2 201 17.3 205 17.4 206 17.5 206 17.6 206 17.7 207 18 NAME CHANGE BY DPIIT - RECOGNISED STARTUP ENTITY - WHETHER PERMITTED 18.1 208 19 CIN/LLPIN CHANGE BY DPIIT - RECOGNISED START-UP ENTITY - WHETHER PERMITTED 19.1 211
I-14 20 CONVERSION BY A DPIIT - RECOGNISED ENTITY FROM ONE FORM TO ANOTHERWHETHER PERMISSIBLE 20.1 212 20.2 212 20.3 213 20.3-1 xiii 215 20.3-2 xiii 219 20.4 xiiib 221 21 AUTOMATICALLY CEASING TO BE A ‘START-UP’ UNDER THE LSN 21.1 230 21.2 231 21.2-1 232 22 APPROVALS NEEDED BY START-UP ENTITY FOR CLAIMING TAX BENEFITS 22.1 234
I-15 22.2 234 22.3 235 23 TAX EFFICACY OF DIFFERENT START-UP ENTITY FORMS - FIRMS, LLPs & PVT. COs. 23.1 237 23.2 239 23.3 241 23.4 246 24 TAX HOLIDAY TO START-UPS UNDER SECTION 80-IAC 24.1 248 24.2 249 24.2-1 - 250 24.2-2 250 24.2-3 251 24.2-4 321 24.2-5/6 338 24.2-7 ` 339 24.2-8 340 24.2-9 344
I-16 24.2-10344 24.2-11 346 24.2-12 346 24.2-13 348 24.2-14 349 24.2-15 362 24.2-16 362 24.2-17 362 24.3 362 24.4 363 24.5 364 24.6 364 24.7 365 24.8 365 24.9 366 24.10 366 24.11 368
I-17 25
START-UP COMPANIES 25.1 374 25.1-1 - 376 25.1-2 378 25.2 viib 379 25.2-1 viib 389 25.2-2 390 25.2-3 391 25.2-4 viib 393 25.2-5 396A 25.3 397 25.4/5 399 25.6 400 25.7410 25.7-1 411 25.7-2 413
FUNDING BLUES OF PRIVATE LIMITED
I-18 25.7-3 415 25.7-4 415 25.7-5 420 25.7-6 421 25.7-7 422 25.7-8 422 25.7-9 423 25.7-10 423 25.7-11 431 25.7-12 432 25.7-13 433 25.7-14 433 25.7-15 435 25.7-16 435 25.7-17 437 25.7-18 438 25.7-19 438 25.7-20 - 439 25.7-21 440
I-19 26 EXEMPTION FROM ‘ANGEL TAX’ TO PRIVATE LIMITED COMPANIES START-UPS 26.1 441 26.2 445 26.3 445 26.3-1 447 26.3-2 448 26.3-3 448 26.3-4 448 26.3-5 450 26.3-6 450 26.3-7 450
I-20 26.3-8 450 26.4 451 26.4-1 452 26.5 - 453 26.6 453 26.6-1 454 26.6-2 454 26.6-3 458 26.7 458 26.8 460 26.9 460
I-21 26.10 i.e. viib 460 26.11 461 26.12 461 27
WHEN ANGEL TAX EXEMPTION IS NOT APPLICABLE 27.1 463 27.1-1 464 27.1-2 466 27.1-3 471 27.2 471 27.2-1 472 27.2-2 474 27.2-3 474 27.2-4 475 27.2-5 475 27.2-6 475 27.2-7 i a 476 27.2-8 ii a 476
COMPUTATION ON FMV OF SHARES ISSUED
CONDITIONS
OR
I-22 27.2-9 iii a 476 27.2-10 iv a 477 27.2-11 vi a 478 27.2-12 vi a 483 27.3 484 27.3-1 486 27.3-2 487 27.3-3 489 27.3-4 490 27.3-5490 27.3-6 - 492 28
28.1 493 28.2 495
FOR CARRY FORWARD
SET OFF OF LOSSES OF START-UP PLC U/S 79
I-23 29 DEFERRING TDS OR TAX PAYMENT IN RESPECT OF ESOP INCOME OF EMPLOYEES OF ELIGIBLE START-UPS 29.1 497 29.2 - 500 30 TAX & TDS ON WINNING FROM ONLINE GAMES 30.1 504 30.2 504 30.2-1 505 30.2-2 506 30.2-3 507 30.2-4 508 30.2-5 v. 513 30.3 515 30.3-1 516 30.3-2 516 30.3-3 518 30.3-4 519 30.3-5 526 30.3-6 529 30.3-7 - 530 30.3-8 531
MANDATORY ACCEPTANCE OF PAYMENTS THROUGH PRESCRIBED ELECTRONIC MODES IF TURNOVER EXCEEDS
I-24 30.4 534 30.4-1 535 30.4-2 536 30.4-3 537 30.4-4 537 30.4-5 538 30.4-6 539 30.4-7 540 30.4-8 540 30.4-9 545 30.4-10 546 30.5 547 30.6 548 30.7 549 30.8 550
31
RS.
31.1 552 31.2 554 31.3 556
50 CRORES - SECTION 269SU
APPENDICES
I-25 31.4 556 31.5 557 31.6 557 31.6-1 558 31.7 558 31.8 559 31.9 560 31.10 560 31.11 561 32 TAXATION OF INVESTORS EXITING STARTUPS 32.1 563 32.2 564 32.2-1 564 32.2-2 564 32.3 564 32.4 565 32.5 567
NEW DEFINITION OF ‘START-UPS’ 571 REPEALED DEFINITIONS OF ‘START-UP’ 578 RELEVANT SECTIONS OF INCOME-TAX ACT, 1961 589 RELEVANT RULES OF INCOME-TAX RULES, 1962 614 NOTIFIED CLASS OF PERSONS UNDER CLAUSE (ii) OF PROVISO TO SECTION 56(2)(viib) 621
SECTION 56(2)(viib) OF THE INCOME-TAX ACT, 1961 - INCOME FROM OTHER SOURCESCHARGEABLE AS - STARTUPS - CONSOLIDATED
I-26
CIRCULAR FOR ASSESSMENT
623 SCHEME FOR FACILITATING START-UPS INTELLECTUAL PROPERTY PROTECTION (SIPP) 625 NEW MSME NOTIFICATION (NMN) 629 GUIDELINES FOR RECOGNITION OF START-UPS 634
OF START UPS
FUNDING BLUES OF PRIVATE LIMITED START-UP COMPANIES
25.1 ADDITIONAL ONUS ON START-UP PRIVATE LIMITED CO. TO EXPLAIN ‘SOURCE OF THE SOURCE’ OF SHARE CAPITAL/SHARE PREMIUM RAISED -
Explanatory Memorandum to the Finance Bill, 2012
25 CHAPTER 374
375 Para 25.1 viiba b 23FB iii
25.1-1 Can the AO demand the startup furnish documents like bank statements/ITRs of reputed non-resident marquee investors?
Para 25.1 376 iii See 23FB iv a b vivCIT Nilchem Capital Ltd.
Raw Pressery (P.) Ltd.
--
ACIT
“although the assessee had furnished the primary evidences in support of the share premium received from these foreign investors, the lower authorities chose to sit back with folded hands till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. Such in-action/omission on the part of lower authorities cannot be accepted.”
377 Para 25.1 -
-
25.1-2 Seamless e-verification by Department for the purposes of 2nd proviso to section 68
Para 25.1 378 supra
i f n
See Para 25.2-4
25.2 ANGEL TAX U/S 56(2)(viib) - SHARE PREMIUM RECEIVED BY CLOSELY HELD COMPANIES IN EXCESS OF FMV TAXABLE
Apollo Sugar Clinics Ltd. Deputy Commissioner of Income-tax, Circle-1(1), Hyderabad
See Para 25.2-5
Microfirm Capital (P.) Ltd. Dy. CIT
379 viib Para 25.2
viib viib viz. b
viib
viib -
Flutura Business Solutions (P.) Ltd. Income Tax Officer, Ward-3(1)(1), Bangalore -
Guidance Note of Terms Used in Financial Statements -
‘the excess of the issue price of shares over their face value.’
viib Commissioner of Income Tax, Corporate Ward 3(4), Chennai Vaani Estates (P.) Ltd
See Chapter 27
Para 25.2 380 viib viibviib
i iiviib
381 viib Para 25.2 Such tax is popularly known as angel tax viib viib ` ` viib ` Cimex Land and Housing (P.) Ltd. Income-tax Officer, Ward-6(2), New Delhi-
(aa) “specified fund” means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulated under the International Financial Services Centers Authority Act, 2019 (50 of 2019);
(ab) “trust” means a trust established under the Indian Trust Act, 1882 (2 of 1882) or under any other law for the time being in force.
Notification No. S.O. 1131(E), dated 5-3-2019
No. GSR 127(E), dated 19-2-2019
See Para 25.2-2
Notification
Para 25.2 382 viib viib viibi ii i
ii
viib
-
TAXATION OF START-UPS & INVESTORS
AUTHOR : TAXMANN'S EDITORIAL BOARD
PUBLISHER : TAXMANN
DATE OF PUBLICATION : MAY 2023
EDITION : 6th Edition
ISBN NO : 9789356227453
NO. OF PAGES : 710
BINDING TYPE :
DESCRIPTION
Rs. 1795 USD 54
This is a handy book for the taxation of start-ups & investors, including, but not limited to, the following:
• Tax Holiday u/s 80-IAC of the Income-tax Act 1961
• Angel Tax Exemption
All topics related to the taxation of start-ups & investors are discussed in light of the following:
• Department for Promotion of Industry and Internal Trade (DPIIT) Guidelines
• Inter-ministerial Board (IMB) Decisions made in IMB Meetings
• Relevant Legal Provisions
• Case Laws, including the landmark decision of Raw Pressery (P.) Ltd. vs ACIT [2022] 143 taxmann.com 158 (Mumbai-Trib.)
The Present Publication is the 6th Edition and has been amended by the Finance Act 2023. This book is authored by Taxmann's Editorial Board with the following noteworthy features:
• [Start-up Ready Reckoner]
o Eligibility Ready Reckoner for tax holiday u/s 80-IAC
o Compliance Ready Reckoner for turnover-limit linked compliances/exemptions for the following entities:
◦ Private Companies
◦ Limited Liability Partnership
◦ Traditional/General Partnership Firm
o Tax Benefits available for DPIIT-recognised start-up private limited companies based on their turnover
• [Tabular Format of Tax Holiday for Start-ups approved by IMB] in the following cases:
o Grounds of Innovation
o Grounds of Scalability
o Grounds of Employment Generation or Wealth Creation
o Grounds of Improvement in Products
• [Detailed Analysis of Finance Act 2023 Amendments] including new provisions regarding taxation & TDS on winnings from online games
• [Detailed Analysis with a Specific Focus] on the following topics:
o Revised Guidelines for recognition of start-up
o Process of IMB Certification for a tax holiday
o Options of low tax rate regime u/s 115BAA/115BAB without tax holiday
o Relative tax efficacy of various start-up entity forms, such as:
◦ Registered Partnership Form
◦ Limited Liability Partnerships
◦ Private Limited Companies
o One Person Company as a start-up entity form
• [Case Studies] of acceptance/rejection by IMB of a start-up's application for a tax holiday
• [FAQs] are given at the start of the book
• [Detailed Analysis of Difference between MSMEs and Start-ups] and benefits available under the MSMED Act, 2006
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