Finance minister Nirmala Sitharaman proposed an extension of the tax holiday to startups by another year to 31st March 2022 in her Union Budget 2021 speech.
She also announced that the current exemption on capital gains made by startups in certain cases would be extended by a year
Finance minister Nirmala Sitharaman proposed an extension of the tax holiday to startups by another year to March 31, 2022 during her Union Budget 2021 address. Moreover, she also announced that in order to incentivise investment in startups, the government is proposing extending the eligibility period of claiming capital gains exemption for investment made in the startups by one more year to March 31, 2022.
In the Union Budget of 2017, the then finance minister, the late Arun Jaitley had announced that startups that were incorporated after March 31, 2016 could avail a tax holiday for three out of seven years, from the date of incorporation. But there is an important rider from the outset — startups can avail this exemption provided that annual turnover does not exceed INR 25 crores in any financial year.
According to Section 54 EE of the Income Tax Act, eligible startups are exempted from paying tax on a long-term capital gain if such a long-term capital gain or a part thereof is invested in a fund notified by central government within a period of six months from the date of transfer of the asset. The maximum amount that can be invested in the long-term specified asset is INR 50 Lakh.