Income Tax Exemption Extended in 3 Crucial Areas

Income Tax Exemption Deadline for Three Crucial Sectors Extended up-to 31 March 2025 

I-T Exemption Extended in 3 Crucial Areas: In the latest budget announcement for 2024, the Indian government has chosen to maintain existing tax rates while extending income tax benefits in three crucial sectors. This move is expected to provide a significant boost to startups, Indian units of foreign banks in GIFT City, and sovereign funds and foreign pension funds. Let’s delve into the details of these extensions and understand how they can positively impact these key areas.

Startups under Section 80-IAC

For startups with a turnover of less than ₹100 crore, are eligible to avail a tax holiday period to three years, any time within the first ten years of their incorporation. The deadline for incorporation has been extended by one year, allowing companies formed in the next twelve months to apply for a three-year tax break under Section 80-IAC.

IFSC Units under Section 10 4D & 4F

The Financial Services Centres Authority (IFSCA) established in 2020 at GIFT City in Gandhinagar, Gujarat, serves as a unified regulator for financial entities. The tax benefits for entities under the IFSC have been enhanced, with offshore derivative contracts issued by foreign portfolio investors (FPIs) in GIFT City being recognized as legal contracts. This enables Indian units of foreign banks in GIFT City to invest in Indian stock markets. These units are now eligible for a 10-year tax exemption out of 15 years. According to the Budget 2024, the deadline for the relocation of funds from other countries into GIFT City has been extended to March 31, 2025, providing an extra year for such transfers.

Sovereign Wealth Funds & Pension Funds under Section 10(23FE)

Until declaration of Budget 2024, Sovereign wealth funds and pension funds, categorized as specified funds, were eligible for a tax break for interests, profits, and dividends earned by their units in GIFT City from investments made between April 2020 and March 2024. According to the budget 2024, this exemption, subject to certain conditions, is now available for investments made until March 2025, providing an additional year for tax benefits.

Conclusion

The income tax exemptions extended in the three key areas of startups, IFSC units, and sovereign funds demonstrate the government’s commitment to fostering economic growth and investment. The one-year extension in each category provides businesses with added flexibility and incentives to thrive in their respective sectors. As India continues to position itself as an attractive destination for startups and international financial activities, these tax measures are poised to contribute to a more robust and competitive economic landscape.

To Access the Highlights of Tax Announcements in Budget 2024 CLICK HERE

To Access the Press Release on Budget 2024 Highlights CLICK HERE

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