Tax benefits every startup should know

India is a developing country. It has great resources, time, capital and labour to produce the finest services in the world. it is one of the fastest growing countries in the world. this is achieved because of the incentives, opportunities and favours given to the citizen for growing and nourishing in their respective field. These incentives and subsidies provided has helped in the overall development of the economy in a great scale.

What is a startup?

Many people are yet not familiar with the concept of start-ups. It is a great initiative, started by the Indian government. It is basically a culture of starting your own business through helps from the government. The work of the start-ups usually involves the work of development or innovation and not just pure business. The total turnover of the business or start-up should not be more than 25 crore for the preceding financial year.  Furthermore, such business should also not be a result of some merger, or break up from some previous business already existing, it should be a new idea working for innovation by an entrepreneur.

Government of India provides some tax benefits to the start-ups to encourage their growth. Such tax benefits can be easily availed by any entrepreneur in India, by showing the right title and documents. Let us look at the tax benefits available.

Tax benefits for startups

1. This is the biggest tax benefit given to start-ups in India, where the start-ups are given exemptions from all the taxes for the first three financial years except the Minimum alternate tax or MAT. If the start-up is registered, and the documents are correct, then every start-up can avail of this benefit. This benefits the owner highly as all the profits earned in the first three years goes back into the business without any loss due to taxes. It helps the start-up to grow fast without any impediments. This is a great initiative by the government of India. there is a whole hundred percent exemption for the first three years of the start-up which will eventually help the profits to go into the pockets of the owner, who can further use it into the development of startup itself.

2. Another tax exemption given by the government of India is an exemption from the capital gain tax for the start-ups. The start-up which is registered and raises up its funds through shares and other such measures which is very common in business today, can get exemption from paying the taxes on profits earned through capital gains. This capital gain tax exemption is available up to twenty percent on the capital gain. So an entrepreneur can get up to twenty percent of the exemption on capital gain. It is a very innovative way to boost the growth, as the start-ups that raise their funds often find themselves mingling through capital gain taxes throughout the year. Entrepreneurs in start-ups can get exemption and avail the benefit. Such exemption encourages raising capital through capital means such as issuing shares in the stock market. It encourages growth and creativity of the startup, and also helps in raising capital easily without any impediment.

3. Another great step taken in the last few years is the abolition of angel investment tax. Angel investment is the kind of investment which is done by an acquaintance of the owner. Usually, when a new startup is opened, there is not much goodwill or trust regarding it in the market. This makes it difficult for the owner to raise fund through loans and other financial institutions. A person who is a novice finds this type of investment very profitable. The interest and profits are given accordingly to the angel. The government charged taxes on such investment also, but with the new taxing provisions, such taxing provision has been abolished for the new entrepreneurs in India.this helps the new owners who have stepped into the business world recently and wish to revamp their business through their profit without being burdened by the taxes immediately. This was abolished during the last budget session, which was included in the taxes law now. it has helped the entrepreneurs in India to a great extent, as they can now take investment from their family and relatives, without providing any tax on it.

4. This is not basically a tax emption, but a kind of help given by the government of India to the new entrepreneurs by the way of financial aids. It is called FoF or the fund of funds which initiates a delivery of some initial capital fund to the entrepreneurs for the purpose of opening up a new startup. This boosts the development of all start-ups that nag due to lack of funds initially.


With the advent of time and technology, it has become very important to use it efficiently. The best way to use the resources efficiently is through innovation. The government by offering these tax evasions and exemptions to the start-ups has taken a great initiative as it is helping the new people in entering into the business world without worrying about losses or funds. The combined effect of these provision makes it very easy for any person to open up a start-up and run it efficiently. India needs for provisions like this for the new innovation, so that more and more talent is converted into efficient skill, and helps in the growth of Indian economy eventually. The government of India has been providing these tax benefits since past few years through its start-up India programme. This programme has up till now helped a lot of new entrepreneurs in India, and is also planning to help many more. The funds transferred to the new owners help them build up, and the tax exemptions help them continue the growth without cutting on the profits. It has combined effected the startup culture very much, and will eventually lead to an environment of great innovation and creativity.