🧾 Recognised Startups Eligible for Tax Exemptions and Deductions: Income Tax Department Clarifies
📅 By Author | April 20, 2025
📂 Category: Startup News | Income Tax Exemptions 2025 | Angel Tax Updates
📌 Income Tax Department Clarifies Startup Tax Benefits
India’s Income Tax Department has announced that DPIIT-recognised startups can claim multiple tax exemptions and deductions under the Income Tax Act, 1961. To qualify, they must fulfill the required conditions and submit Form-2.
On X (formerly Twitter), the department assured that eligible startup investments won’t face tax scrutiny, giving investors and entrepreneurs a welcome relief amid ongoing angel tax concerns.
“Recognised startups that fulfill conditions under the DPIIT notification dated February 19, 2019, and submit Form-2, qualify for tax benefits,” the department noted.
💸 Angel Tax Relief: What Startups Need to Know
The 2019 DPIIT notification simplified startup definitions and granted full angel tax exemption on investments up to ₹25 crore. This move aimed to boost innovation and promote early-stage funding.
Here’s what it means:
- DPIIT-recognised startups qualify for exemption under Section 56(2)(viib).
- Investors don’t face income tax scrutiny on investments in these startups.
- However, startups must file Form-2 and meet all eligibility criteria.
⚠️ Watch Out: Non-Compliance May Lead to Scrutiny
While compliant startups enjoy exemptions, others may still face scrutiny. The department reminded that companies which fail to meet conditions will be reviewed under its risk management strategy.
“We may scrutinise investments in companies that don’t meet the required conditions,” the department warned.
Therefore, startups must maintain compliance to continue receiving benefits.
🚀 A Positive Signal for the Startup Ecosystem
This clarification arrives at a pivotal time. Startups across India are adapting to regulatory updates and seeking long-term policy support. By reinforcing these tax benefits, the government aims to:
- Attract both Indian and foreign investments
- Lower legal and financial uncertainties
- Enhance the overall ease of doing business
Such reforms will help entrepreneurs focus on innovation rather than compliance worries.
