The Union government on Wednesday, February 1, announced to extend the tax holiday scheme for startups till March 31, 2024, which means that startups incorporated till the latest date next year can avail tax benefits. The tax holiday scheme was earlier available for startups incorporated till March 31, 2023.
"We propose to extend the date of incorporation for income tax benefits startups from 31.3.2023 to 31.3.2024. I further propose to provide the benefit of carry forward of losses on change of shareholding of startups from seven years of incorporation to 10 years," said Finance Minister Nirmala Sitharaman.
In the Union Budget in 2017, the government had for the first time announced that startups incorporated after March 31, 2016 could avail a tax holiday for three out of seven years from the date of incorporation, provided that annual turnover does not exceed Rs 25 crore in any financial year.
Anuj Parekh, CEO and Co-Founder Healthysure, said that the extension of the tax benefit deadline is a positive step for the startup ecosystem.
Sitharaman also extended the benefit of carry forward of losses on change of shareholding of startups to 10 years of incorporation from seven years now. "The amendment to set off losses for 10 years is another positive as it is difficult for disruptive and tech startups to be profitable at the get-go especially if they are catering to India's billion Internet users," he said.
Prakhar Pandey, Founder and CEO, Moolaah, said that these steps will boost entrepreneurship across the country, leading to further employment.
"With India's present startup ecosystem and a dry-up in funding across stages of growth, a few of these steps might help domestic and foreign investors to take a larger bet on good quality startups," he added.
The Economic Survey for 2022-23 said this week that more than nine lakh direct jobs have been created by the Department for Promotion of Industry and Internal Trade (DPIIT)-recognised startups, with a notable 64 per cent increase in 2022.
As per the Survey, the number of recognised startups in the country has increased from 452 in 2016 to 84,012 in 2022.
"About 48 per cent of our startups are from Tier II and III cities, a testimony of our grassroots' tremendous potential," read the Economic Survey.
Subodh Garg, CFO, Cashify, said that since the launch of the Startup India initiative in 2016, the government has taken numerous steps to establish India as a hub for startups.
"The extension of the period of carry forward of losses on change of shareholding of startups from seven years of incorporation to 10 years is another measure that will help foster the growth of the startup industry and drive innovation in the country," said Garg.