In order to reduce concerns on tax holiday for startups, the tax department as asserted that only small startups with turnover up to INR 25cr will get tax holiday. The startups have to fulfill certain conditions to be eligible for the allowance. Companies exceeding the revenue of 25cr may have to pay tax with interest.

CBDT said, by the provisions of Section 80-IAC of the I-T Act the turnover limit for small startups claiming deduction has been determined.

The section 80IAC had defined details for the eligibility, and startups have to fulfill the conditions specified in the section for claiming the tax deduction.

The department has not recognized the 100cr revenue notification for small startups put by DPIIT, Department for Promotion of Industry and Internal Trade. However, the benefits under the Income Tax Act are subjected to the conditions specified by DPIIT’s February 19th notification.

"Since the intention was to support the small startups, the turnover limit of Rs 25crore was considered reasonable for granting profit linking deduction," it said.