Companies get full tax exemptions in India- know How?

What if you do not have to pay any tax? What if you get all the taxes deducted so far back in your account, you’ll definitely go for an expensive holiday vacation with that I bet. Tax relief does bring a smile to the face of everyone, especially businessmen. Like Individuals get tax reliefs on their children’s fees or their insurance premium, similarly, corporates get tax exemptions for different purposes. Companies in India get tax exemptions or reliefs from Government if they set up their office in an underdeveloped area like SEZ (Special Economic Zones) as they help in developing that area socially & financially. Below are the details of the requirements to claim for different tax exemptions in India. Know how to get tax exemptions for companies in India and save huge.

tax exemptions india
tax exemptions india

Types of Tax Exemptions available to Companies in India

Special Economic Zone (SEZ)

A special economic zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and legal compliance. SEZs are located within a country’s national borders. However, they are treated as a foreign territory from a taxability perspective. In India, any company situated in SEZ receives tax exemptions since it is helping that area to develop economically and is boosting employment opportunities as well. 

As a businessman, you should set up your office or venture into a Special Economic Zone (SEZ). Besides getting tax exemptions in India you will end up availing other benefits as below:

  • The cost of setting up your business will be very low, due to the low cost of land, building cost, etc.
  • Easy penetration with your product or services in the market.
  • Creating Brand loyalty in SEZ is much easier as compared to a metropolitan city.
  • The use of penetrating prices will work wonders.
  • Advertising and promotion cost is comparatively less to reach the masses within that area.
  • Hire laborers at the lowest cost possible.
  • Above all get various Government subsidies and tax exemptions in India.

Department of Scientific and Industrial Research (DSIR)

The Department of Scientific and Industrial Research (DSIR) is a part of the Ministry of Science and Technology, which was announced through a Presidential Notification. The following are exempted from GST subject to registration with the DSIR.

Below are the types of Corporates which are eligible for tax exemptions in India through DSIR

    • Public funded research institutions or a university or an Indian Institute of Technology or Indian Institute of Science, Bangalore or Regional Engineering College, other than a hospital.
    • Research institutions, other than a hospital.
    • Departments and laboratories of the Central Government and State Government, other than a hospital.
    • Regional Cancer Center (Cancer Institute).

If your business is in any way related to Scientific or Industrial research then, do avail tax exemptions through DSIR in India. 

Software Technology Parks of India (STPI)

Software Technology Parks of India (STPI) is a society established in 1991. It was set up by the Indian Ministry of Electronics and Information Technology with the objective of encouraging, promoting, and boosting the export of software from India.

Many IT firms, in fact, start-ups are getting STPI tax exemptions in India and are thus able to sustain through cut-throat competition. Tax exemption of any kind boost the confidence to entrepreneurs to establish their own start-ups. 

tax exemptions india
tax exemptions india

Tax Exemptions Process for SEZ locations/ DSIR/STPI in India

SEZ Exemptions requirements: – A company to avail SEZ exemptions must follow the below forms and should have below mentioned documents

  • The government of India approves the SEZ exemptions. The approval document is known as “Letter of Approval “(LOA). This is the main document which the company has to show to avail tax exemption from suppliers
  • LOA has to be issued by the Government of India. Document issued by the company under their letterhead or any other document other than the LOA will not be accepted to process SEZ exemptions
  • LOA comes with an expiry date and it’s easy to validate under the terms and conditions of the LOA Letter. If the LOA expires, need to ask the customer to share the revised/renewed LOA.
  • The approved SEZ address mentioned in the LOA should match the shipping address
  • If the customer goes through Name Change/amalgamation, the Government needs to approve it with reference to the concerned LOA. Name Change document is mandated if the SEZ undergoes name change as well.

DSIR Exemptions requirements-A company to avail SEZ exemptions must follow the below norms and should have below mentioned documents

  • For DSIR exemptions, the concerned institute should have registered with DSIR and the registration certificate to be there in place
  • DSIR registration certificate should be valid and not expired

Benefits of getting Tax exemptions in India

Companies in their initial years are struggling with funds. Talk about SME’s or MSMEs, the journey is toughest for them. Any form of relief be it tax exemptions or Government subsidies is like a ray of hope for them. Below are the tax exemption benefits that companies get in India:

  • Survive the start – Survive in initial years of struggling journey. Funds are scarce resources, and getting funds is not easier especially for SMEs and MSMEs. tax exemptions provided by Government for companies in India give them a sense of confidence to continue their difficult journey. Especially those under huge losses.
  • Create employment opportunities – Government will provide tax benefits to companies in India only if they are actually helping the Government in creating employment opportunities. More opportunities help people living in remote areas to improve their standard of living.
  • Innovative products and services – Any surplus fund saved by the companies are further invested in research and development. This is done to add innovative products and services to their offerings. In a way giving people more options with enhanced features.
  • Seasonal fluctuations – Companies through savings due to tax exemptions will be better equipped to handle any seasonal fluctuations. Demand and supply mismatch results in seasonal fluctuations.
  • Shock absorbent – Companies will be able to absorb any shocks resulting from unforeseen situations like the Covid situation.
tax exemptions india
tax exemptions India

Fun facts

In India, there are 358 total SEZ, but of which many have become non-operational.

What are your thoughts on tax exemptions in India?

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