At the Union Budget 2022, finance minister Nirmala Sitharaman proposed extending the startup tax holiday scheme to startups incorporated till March 31, 2023, in addition to the startups that had already been eligible for the exemption.
Till now, the tax holiday was available for startups incorporated till March 2022. Last year, the FM had announced a similar one-year extension to the startup tax holiday policy.
In the run up to the Budget this year, one of the most popular demands by the startup ecosystem was the extension of the tax holiday. This is particularly important since the number of new startups increased in 2021 for the first time in six years. Founders had told us that an extension of the tax holiday for startups would be a great way for the government to show its commitment towards building a robust and dynamic startup environment.
India’s Startup Tax Holiday
In the Union Budget of 2017, the then finance minister, the late Arun Jaitley had announced that startups that were incorporated after March 31, 2016 could avail a tax holiday for three out of seven years, from the date of incorporation. Startups can avail this exemption provided that annual turnover does not exceed INR 25 Cr in any financial year.
Sitharaman added during her address that over the past year startups have grown in relevance and their contribution to the economy is also growing in significance. The fact that Indian startups raised $42 Bn in calendar 2021 not only underlines the significance of the ecosystem but also tells why startups deserve a greater focus in Union Budget than in earlier years.
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