Tax Exemptions For Start-Ups Notified

In order to catalyse entrepreneurship and let the start-up segment flourish, the Indian government has issued a notification¹ dated February 19, 2019 ("Notification"), which sets out certain tax exemptions available to start-ups under the Income-tax Act, 1961 ("Act").

Tax Exemption to Start-ups

Section 56 (2)(viib) of the Act provided that the amount raised by a start-up in excess of its fair market value would be deemed as income from other sources and would be thus taxed. However, with the latest Notification, a start-up will be exempt from such taxation if the aggregate sum of these investments does not exceed an amount of Rs. 25 crores.

Definition of Start-up

Under the Notification, an entity will be considered a start-up: