Start-ups Guides to Indian Taxation | Documents | Procedure

Start-ups in India is becoming very popular day by day in India. It’s become a major objective of wealth creation and employment. Under the leadership of Prime minister, several initiatives are announced regarding levy of income tax on start-ups India. In these articles, all the initiative and other relevant points on start-ups in India are going to be discussed.

The following things about Indian taxation on start-ups have been demonstrated in this article:

•    Manner of Computation.

•    Income tax on start-ups.

•    Tax initiatives.

Manner of Computation of Income:

As the name refers, taxation is always levied on the income and not on the sale revenue. Here we have differentiated between income and sale revenue.

-    Income: Gross income at the end of the year.

-    Sales Revenue: Total value of goods sold/ services provided.

If sales, expenditure, and depreciation subtracted from each other than income generated. And that income tax is levied.  For novice start-ups, sometimes it is difficult to track all sales revenue, expenses, and depreciation, and also manage these invoices hassle-free. To make it simple, the government has announced the Presumptive Scheme of Taxation, wherein a person can disclose income as below.

-    Income = 50% of the value of the services provided.

-    Income = 8% of the total goods provided sold. 

Presumptive scheme of taxation allows you to calculate the tax on an estimated income or gain.

Income tax on Start-ups:

Income tax is levied by the government. To compete with the other countries Indian start-ups finally received a sigh of relief from the taxes. As per the Section 56 which is popularly known as the Angel Tax Provisions, the start-ups up to 25 crores will be exempted from the Angel tax, up from the current 10 crores. Additionally, the start-up's sales above from 100 crores will be eligible for tax relief. The relief is expected to generate wealth, boost the economy and increase employment in India.

-    The tax on proprietorship business entity will depend on the as per the income slab.

-    The tax on LLP firm/ Partnership is 30% of income.

-    The tax on Indian company is 20% of income.

Tax Initiatives for Start-ups:

As per the current norms, there is a 100% tax deduction under section 80 IAC for eligible start-ups from payment income tax. The starts incorporated on or after 1st April 2016 and before 1st April 2019 can claim a 100% tax deduction.

All eligible start-ups intend to claim 100% tax exemption should follow some rules:

-    Maintain bookkeeping.

-    Get their account audit by CA.

-    Furnish audit report in Form 10CCB along with ITR.

Meaning of Eligible Start-ups:

All start-ups in India are eligible to get the benefits of 100% tax deduction. Only start-ups which satisfy the needs below mentioned requirements are considered as eligible- start-ups.

-    Incorporated as a company or LPP.

-    Income at the end of the year must be greater than Rs. 25 crores.

-    Incorporation is certified by the Inter-Ministerial Board of Certification in respect of Eligible Business. It is a business entity which involves innovation, development, deployment, or commercialization of new products and services.

-    Must not be formed by reconstruction of a business already in existence. 

Advantages of Indian taxation on start-ups and Small Business:

Before inauguration of GST, it is very difficult for the small businessess to operate its services in multiple states because the VAT registration of each state is different. Additionally, it is hard to maintain compliance with VAT regulations.

With implementation of GST in India, the GST registration procedure would be centralized and standardized similar to service tax. GST regime has reduced the cascading taxes. Under the GST regime small business would no longer to apply for multiple registration. Only single GST registration in India is enough to operate a business.

The multiple VAT causes complexities while claiming for a payment. Small business unable to calculate multiple taxes. To address these complexities, government released GST tax which is a sigh of relief for the small business. Small business whose turnover is lesser than 10 Lakhs per annum would not be required to apply for GST registration in India. Moreover, small business whose turnover lies between 10 Lakhs to 50 Lakhs financial year have to pay GST in India at a lower rate. Therefore, thousands of small business and start-ups whose annual turnover lies between 5 Lakh to 10 Lakh would be out of the GST tax and run a business hassle-free.

Another great advantage of getting GST registration in India under the composition of scheme is that the tax rate for such taxpayer is nominal under the GST law. 

As GST has bought together a number of multiple taxes under one umbrella, simplifying taxation for services and commodities businesses.

One of the major benefits of GST is that it reduce the corruption and diminishes all the unregulated and unauthorized companies.

GST tax in India has reduced taxes on certain goods by 2% and by 7.5 % respectively, such as smartphones and cars.

Every people who are doing logistics business will get a great relief because GST tax in India reduces multiple taxes. So that they can transfer their goods and services to other states hassle-free.

GST taxes in India is expected to make the process for obtaining tax registration easy and online.

GST taxes in India would reduce administration cost, boost efficiency, and improve transparency.

Final say:

Hence, it is said that GST taxes in India reduce the complexities while filling multiple taxes and give a sigh of relief to the small business owners whose annual turnover lesser than 10 Lakh. If you are looking for a legal advisor who can help you in filling GST, GST return or payment. Get in touch with us, we at, Unilex consultant, provides you entire range of services related to the GST taxes in India.

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