Corporate Tax Exemption for Companies and Startup India in Budget 2020
Business taxation means to those taxes that businesses must compensate as a general part of business operations. Even if you are a sole proprietor, partner, a member of LLP or LLC, or a business, your business is answerable for holding fast to tax regulations.
Corporate tax rates cut to 22% for residential or domestic companies and cut to 15% for new local manufacturing companies and other financial assistance.
Domestic companies who have settle on concessional rate u/s 115BAA and 115BAB can take deduction under section 80JJAA or 80M.
Now it is proposed to revise the provisions of section 115BAA and section 115BAB to not grant deduction under any provisions of Chapter VI-A other than section 80JJAA or section 80M, in case of residential or domestic organizations go for taxation under these sections.
These changes will catch results from 1st April, 2020 and will, therefore, apply in link to the AY 2020-21 and subsequent assessment years.
The domestic companies who don't wish to avail this concessional rate quickly can opt for the same after the expiry of their tax break period or exemptions/incentives.
The first structure is a concessional structure for existing domestic companies. The feature tax rate applicable for all existing domestic companies is reduced to 22%, resulting in a successful rate of 25.17%. But, companies deciding for this system won't be qualified to claim specified tax deductions/incentives, such as additional depreciation, tax holidays and weighted deduction.
The second concessional tax system applies to new residential manufacturing companies. With a view to promoting the ‘Make in India’ initiative, a new provision has been introduced to provide for a beneficial rate of 15% (effective rate of 17.16%) for domestic manufacturing companies which are set up and registered after October 1 2019 and which start manufacturing before March 3, 2023.
Tax Audit Limit Increased
With effect from 01st April, 2020, in order to reduce compliance burden on small and medium enterprises, the threshold limit has been expanded for a person carrying on business from Rs. 1 Crore to Rs. 5 Crore rupees in cases where,-
- aggregate of all receipts in cash during the previous year does not exceed 5% of such receipt; and
- aggregate of all payments in cash during the previous year does not exceed 5% of such payment.
To empower pre-filling of returns in case of persons having income from business or profession, it is required that the tax audit report may be furnished by the said assesses at least one month preceding to the due date of filing of return of income. This requires amendments in all the sections of the Act which mandates filing of audit report along with the return of income or by the due date of filing of return of income.
In order to be qualified to be a segment of this plan, new businesses must meet the following conditions:
- A company that has been incorporated for less than 7 years certify as a startup. For companies engaged inside the field of Biotechnology, this time period is absolutely 10 years.
- The annual income of these companies should not be more than Rs. 25 Crores.
- The company should fundamentally point towards advancement, innovation, deployment, or commercialization of any new items, services, or procedures that are either determined by innovation or intellectual property.
- The company cannot be created by splitting up an existing company to make a new one.
- The company needs to get its certification from the Inter-Ministerial Board arrangement.
- The company can be enrolled as either a LLP, registered partnership or a private limited company.
3 year tax holiday in a chunk of 7 years
Any startup that has been incorporated after 1 April 2016 can get a 100% tax deduction on its profits for a total period of 3 years within a chunk of 7 years. However, if the company annual turnover beat Rs. 25 Crore, at that point the tax rebate is not substantial. This tax exemption has been set up to assist businesses meet their capital prerequisites while setting up.
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