Finance Minister Nirmala Sitharaman announced tax benefits for startups and investments made by sovereign wealth or pension funds
The minister also mentioned that tax exemptions on certain income of some IFSC units are set to expire on March 31, 2024
In order to ensure continuity in taxation, she proposed to extend the date to March 31, 2025
Finance Minister Nirmala Sitharaman on Thursday announced extension of certain tax benefits and exemptions for startups and investments made by sovereign wealth or pension funds by a year.
While stating that there would be no changes related to taxation and proposing to retain the same tax rates for direct and indirect taxes, including import duties, she spoke about the provision of tax benefits for startups.
“…certain tax benefits to startups and investments made by sovereign wealth or pension funds as also tax exemption on certain income of some IFSC units are expiring on 31.03.2024. To provide continuity in taxation, I propose to extend the date to 31.03.2025,” the finance minister said.
“As for tax proposals, in keeping with the convention, I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct taxes and indirect taxes including import duties,” she added.
The Government of India established the Financial Services Centres Authority (IFSCA) in 2020 under the International Financial Services Centres Authority Act, 2019.
This authority oversees the development and regulation of financial products, services, and institutions within the International Financial Services Centre (IFSC) at GIFT city.
Certain tax concessions related to IFSC are tied to the condition of starting of IFSC operations on or before March 31, 2024. For instance, these concessions apply to the investment division of an offshore banking unit and cover aspects such as tax relief for royalty/interest income from aircraft/ship leasing.
As the deadline neared, the startup community was keeping an eye on a potential announcement for extension of the exemption to promote sustained financial growth in IFSC.
The government has announced several tax benefits for startups over the last few years to boost the startup ecosystem.
Last week, the Centre also notified the rules for direct listing of Indian companies on the exchanges of the GIFT City.
Since the 2019 notice announcing angel tax exemption for startups, 8,066 DPIIT-recognised startups have been granted exemption from angel tax, Inc42 reported earlier.
To qualify for the angel tax exemption, startups are required to submit Form 2 for Section 56(2)(viib) affirming they aren’t investing in assets like land, buildings, vehicles costing more than INR 10 lakh, or other specific assets, unless utilised for specific business-related activities.
Despite the ongoing funding winter, India maintained its position as the third-largest global tech startup ecosystem, boasting over 68K+ tech startups and a robust network of 9.7K+ investors.
