Startups have emerged as drivers of growth for India's economy and with an aim to booth this segment, Finance Minister Nirmala Sitharaman on February 1 announced extended tax benefits for this segment.
So far the startups that were incorporated between April 1, 2016, till March 31, 2021, were eligible for this tax benefit scheme. The finance minister extended the eligibility to March 31, 2023, which is an additional year for the startups.
Such startups will be eligible to get a 100% tax rebate on the profit made for a period of three years in a total time frame of ten years of operations provided that the overall annual turnover does not exceed Rs 25 crore in any financial year.
Such a move is likely to help young startups in meeting their working capital requirements especially during the crucial initial years of their operations.
"Over the last few years, the country has seen manifold in successful startups. Eligible startups established before 31.3.2022 had been provided a tax incentive for three consecutive years out of the 10 years of incorporation. In view of the pandemic, I propose to extend the period of incorporation of the eligible startup by one more year which is up to 31.3.2023 for providing such tax incentives," Sitharaman said in her budget speech.
The country now has over 61,400 recognised startups with almost 75% of districts having at least one startup each.
India has also surpassed the UK to become the third-largest country in terms of the number of unicorns. India generated 44 unicorns in 2021 to emerge third after the US and China which added 487 and 301 unicorns respectively.Unicorns are startups that achieve a valuation of $1 billion.