Limit determined by I-T law, not DPIIT notification: CBDT
The Central Board of Direct Taxes (CBDT) on Thursday clarified that start-ups with an annual turnover of up to ₹25 crore will continue to get a tax holiday as specified in the Income Tax Act.
The clarification comes in the wake of considerable confusion in the industry following a circular in February by the Department for Promotion of Industry and Internal Trade (DPIIT) that defined start-ups as having a turnover of up to ₹100 crore.
This led many to believe that the tax holiday would also apply to companies with a turnover of that amount. “All the start-ups recognised by the DPIIT which fulfil the conditions specified in the DPIIT notification do not automatically become eligible for the deduction under Section 80-IAC of the I-T Act,” the CBDT clarification said.
“A start-up has to fulfil the conditions specified in Section 80-IAC for claiming this deduction,” it added.
“Therefore, the turnover limit for small start-ups claiming deduction is to be determined by the provisions of Section 80-IAC of the I-T Act and not from the DPIIT notification.”
According to Section 80-IAC of the Income Tax Act, eligible start-ups would be granted a tax deduction equal to 100% of the profits for three consecutive assessment years, out of the first seven years from the date of incorporation of the company.
“CBDT disproved the confusion created by some news report claiming discrepancy that I-T law was yet to reflect DPIIT’s higher turnover threshold of ₹100 crore,” the clarification said.
“CBDT said that there is no contradiction in DPIIT’s notification dated 19.02.2019 and Section 80-IAC of the I-T Act.”
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