Advance Taxes and Start-ups
Referred to as ‘Pay-As-You-Earn’ taxation.
Everyone does not have to pay advance tax. It is only applicable on sources of income other than your salary. This includes earnings through a house property or business, interest earnings on investments, income from a lottery and capital gains.
One of them is TDS (tax deduction at source)
You have to pay a part of your annual tax liability in advance.
Eligibility to Pay Advance Tax
Advance tax is payable by all assesses i.e. individuals, businesses, HUF, LLP, etc. unless specifically exempted under Sec. 207(2). Advance tax is payable in every case where the amount of tax liability of the assesse is Ten Thousand Rupees (Rs. 10,000/-) or more.
Statutory Due Dates
Due Dates of Instalment
At Least 15% of Advance Tax Liability
At Least 45% of Advance Tax Liability less Amount paid in earlier Instalment
At Least 75% of Advance Tax Liability less Amount paid in earlier Instalments
At Least 100% of Advance Tax Liability less Amount paid in earlier Instalments
Tax Benefits to Start-ups
Section 80IAC - 100 per cent tax exemption for the first three years (except MAT) to eligible business
· Not by splitting up of Company
· Not by transfer of Plant and Machinery in new business
(i) “eligible business" means a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property;
(ii) "eligible start-up" means a company or a limited liability partnership engaged in eligible business which fulfils the following conditions, namely:—
(a) It is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019;
(b) the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021; and
(c) It holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government;
Section 54GB - Exemption of capital gains arising out of sale of residential property, on investing the same in shares of Start-up Company
Section 56 (2)(vii) – Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received—
(i) by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf.
Explanation.—For the purposes of this clause,—
(a) the fair market value of the shares shall be the value—
(i) as may be determined in accordance with such method as may be prescribed; or
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,Whichever is higher;
(b) "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10;
Extract from Notification for above section 45/2016:
A class or classes of persons includes “Start-Up Company”
Startup Company –
Public are not substantially Interested
Fulfil conditions as notified by Government of India, Ministry of Commerce and Industry. Department of Industrial Policy and Promotion
Section 79- An eligible start-up, loss shall be carried forward and set off against the income of the previous year, even if a change in shareholding has taken place in a previous year subject to all the shareholders of such company on the last day of the year or years in which the loss was incurred, continuing to hold shares on the last day of such previous year. The restriction of fifty one percent of shareholding of company to remain unchanged in order to carry forward and set-off the loss of earlier years has therefore been relaxed in the case of start-ups.