Tax Exemptions and No Scrutiny for Recognized Startups

The Income Tax Department has announced that startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) are eligible for a variety of tax exemptions and will not face scrutiny. This move is part of the government's effort to support the startup ecosystem and reduce compliance burdens.

In response to a query on social media platform X, the department clarified that startups meeting the conditions outlined in the DPIIT notification dated February 19, 2019, and filing a declaration in Form-2, can avail themselves of these benefits under the Income Tax Act, 1961.

Warning for Non-Compliant Companies

However, the department also issued a warning that companies failing to meet the specified criteria may be subject to examination, depending on the department's risk management approach.

Background on the 2019 Reforms

In 2019, the government revised the definition of startups to allow angel tax exemptions on investments up to Rs 25 crore, aiming to foster the growth of young businesses.