The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing1 various provisions. Here are some of the key changes:
Here are the key bullet points regarding the Finance Bill, 2025, proposal to extend the timeline for tax benefits to start-ups:
Tax Benefit for Start-ups: Currently, eligible start-ups can claim a deduction of 100% of their profits and gains for three consecutive years out of ten years, starting from the year of incorporation.
Conditions for Eligibility: To be eligible, the start-up’s total turnover cannot exceed Rs. 100 crores, it must hold a certificate of eligible business from the Inter-Ministerial Board of Certification, and it must be incorporated on or after April 1, 2016, but before April 1, 2025.
Extension of the Benefit: The Finance Bill proposes to extend this benefit for another five years. This means that eligible start-ups incorporated before April 1, 2030, can claim this deduction.
Effective Date: This amendment will take effect from April 1, 2025.
Extension of timeline for tax benefits to start-ups
The existing provisions of Section 80-IAC of the Act, inter alia, provide for a deduction of an
amount equal to hundred percent of the profits and gains derived from an eligible business by an
eligible start-up for three consecutive assessment years out of ten years, beginning from the year of
incorporation, at the option of the assessee subject to the condition that ,–
(I) the total turnover of its business does not exceed one hundred crore rupees,
(II) it is holding a certificate of eligible business from the Inter-Ministerial Board of Certification,
and
(III) it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2025.
2. It is proposed to amend the above section so as to extend the benefit for another period of five years, i.e. the benefit will be available to eligible start-ups incorporated before 01.04.2030.
3. This amendment will take effect from the 1st day of April 2025.
[Clause 18]