Section 80IAC: Deduction in respect of Eligible Business or Eligible Start Up

The provisions of Section 80IAC towards Deductioin in respect of Eligible Business or Eligible Start Up with following conditions are given below –

Conditions to avail Deduction under Section 80IAC –

The following conditions should be satisfied –

1. The assessee is a company or a limited liability partnership (LLP) and engaged in an eligible business (“eligible business” means a business carried out by an eligible start up engaged in innovation, development or  improvement of products or processes or services or a scalable business model with a high potential of  employment generation or wealth creation).
2. The above company or LLP is incorporated after March 31, 2016 but before April 1, 2021.
3. Annual business turnover of the company or LLP does not exceed Rs. 25 crore in the previous year relevant to the assessment year for which deduction is claimed under section 80-IAC.
4. It holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government.
5. The above company or LLP is not formed by splitting up, or the reconstruction, of a business already in existence. However, this condition is not applicable in respect of a start-up which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to  in section 33B.
6. It is not formed by the transfer to a new business of machinery or plant previously used for any purpose [it is subject to a few exception].

(1) 100% Deduction of Profit from Eligible Business [Section 80-IAC(1)]:

Where the gross total income of an assessee, being an eligible start-up. includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such business for 3 consecutive assessment years.

(2) Deduction to be Allowed for any 3 Consecutive Assessment years out of 10 years [Section 80-IAC(2)]:

The deduction specified in section 80-IAC(1) may, at the option of the assessee, be claimed by him for any 3 Consecutive Assessment Years out of 10 years beginning from the year in which the eligible start-up is incorporated.

(3) Conditions to be satisfied to Claim Exemption under section 80-IAC(1) [Section 80- IAC(3)]:

This section applies to a start-up which fulfils the following conditions, namely:—

(i)         it is not formed by splitting up, or the reconstruction, of a business already in existence:

Provided that this condition shall not apply in respect of a start-up which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to in section 33B, in the circumstances and within the period specified in that section;

(ii)        it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

(4) Further Conditions applicable for an assessee Claiming Deduction under Section 80-IAC [Section 80-IAC(4)]:

The provisions contained in section 80-IA(5) and 80-IA(7) to (12) shall, so far as may be, apply to the eligible business under this section. These provisions relate to the following:—

(i)         Computation of profits of eligible business [Section 80-IA(5)]

(ii)        Audit of accounts [Section 80-IA(7)]

(iii)       Inter-unit transfer of goods [Section 80-IA(8)]

(iv)       Restriction on double deduction [Section 80-IA(9)]

(v)        Restriction on excessive profits [Section 80-IA( 10)]

(vi)       Power of Central Government to notify undertakings to which section 80-lB will not apply [Section 80-IA(11)]

Deduction Not to be Allowed in cases where Return is not Filed within the Specified Time limit [Section 80AC]:

No deduction shall be allowed to the assessee under this section unless he furnishes a return of his income of the relevant assessment year on or before the due date specified under section 139(1).