For benefitting startups, the federal government has proposed modifications in firms regulation provisions
The startup and MSME sector had a protracted want record from the Budget 2021. In the Budget, the next calls for of the sector have been met.
Time restrict for incorporation for eligible startup for claiming earnings tax holiday prolonged
Section 80-IAC of Income Tax Act, supplied 100 p.c deduction of the income derived from an eligible enterprise by an eligible startup for three consecutive years out of 10 years, integrated earlier than 1 April, 2021. The Budget has proposed to lengthen the incorporation interval. Now, the aforesaid advantage of 100 p.c deduction of income may be claimed by eligible startup integrated earlier than 1 April, 2022.
Extension of timeline for interval of switch of residential property for availing capital features tax exemption
Section 54GB supplies exemption from capital features (from the switch of residential property on or earlier than 31 March, 2021) utilised for subscription within the fairness shares of an eligible startup. The Budget has proposed to lengthen the time interval of switch of residential property up to 31 March, 2022 now capital features earned from sale of residential property up to 31 March, 2022 may be claimed as exempt by founders the place invested for subscription in fairness shares of eligible startups.
Proposed modifications in firm regulation provisions
For benefitting startups, the federal government has proposed modifications in firms regulation provisions, whereby Indian residents staying in India for a interval of 120 days (as an alternative of 182 days) shall be ready to arrange one-particular person firms and in addition non-resident Indians shall be permitted to incorporate one-particular person firms. Further, the requirement for OPC to compulsorily convert to both a personal firm or public firm, the place the paid-up share capital exceeded Rs 50 lakh or turnover exceeded Rs 2 crore in three years previous consecutive years has been eliminated. Now, OPCs shall be ready to develop with out the above restrictions and this transfer will present flexibility to founders to convert the OPC at any time. To scale back the burden of compliances beneath firm regulation provisions, for an organization to qualify as a ‘small company’, the paid-up capital threshold has been elevated from Rs 50 lakhs to Rs 2 crore and the turnover threshold has been elevated from Rs 2 crore to Rs 20 crore.
Dispute Resolution Committee (DRC)
For offering a possibility to small taxpayers to settle lengthy-pending disputes and be relieved of additional pressure on their time and assets, a DRC is proposed to be arrange. DRC shall be faceless to guarantee effectivity, transparency and accountability. Only disputes the place the returned earnings will not be greater than Rs 50 lakhs (if there’s a return) and the combination quantity of variation proposed in a specified order (order) will not be greater than Rs 10 lakhs shall be eligible to be thought of by the DRC.
Time restrict for evaluation and re-evaluation lowered
To scale back compliance burden and supply certainty to taxpayers, the time-restrict for re-opening of evaluation is proposed to be lowered to three years from the present 6 years from the tip of the related evaluation yr. Re-opening of evaluation up to 10 years shall be solely allowed the place there’s proof of undisclosed earnings of Rs 50 lakhs or extra for a yr. Further, discretion in re-opening and henceforth re-opening is eliminated, henceforth re-opening shall be achieved solely in circumstances flagged foundation information analytics, the objection of Comptroller and Auditor General, and the place there’s proof for tax evasion in search and survey circumstances.
The author is Partner, EY India. Palak Bansal, Tax Professional with EY has additionally contributed to this text.
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