Budget 2017: Start-ups can get tax holiday in first 7 years of existence

In a relief to startups, Finance Minister Arun Jaitley on Wednesday proposed extending the time period for availing tax benefit for three years in the first seven years of existence.

"The profit linked deduction available to the start-ups for three years out of five years is being changed to three years out of seven years," Jaitley said in his Budget Speech.

For the purpose of carry forward of losses in start-ups, the condition of continuous holding of 51%  of voting rights has been relaxed.

However, this is subject to the condition that the holding of the original promoter/promoters continues.

This comes as a relief to startups as they do not make profits in the first few years of operations.

On the issue of removal of Minimum Alternate Tax (MAT), Jaitley said "it is not practical to remove or reduce MAT at present".

"However, in order to allow companies to use MAT credit in future years, I propose to allow carry forward of MAT up to a period of 15 years instead of 10 years at present," he added.

Besides, the Minister has proposed to reduce the income tax for smaller companies with annual turnover up to Rs 50 crore to 25%, in order to make micro, small and medium enterprises (MSMEs) more viable and also to encourage firms to migrate to company format.