Do Tax Incentives Improve the Survival Rate of Start-Ups in India
Ridhi Ravikumar Jagtap1, S Hari Karan2, Harithra Nithish PT3, Dr. Tejaswini S4
1,2,3MBA 2025-27, Student of Management Studies, JAIN (Deemed-to-be University) 4Assitant Professor, Faculty of Management Studies, JAIN (Deemed-to-be University)
ABSTRACT
India's start-up ecosystem has emerged as one of the most dynamic in the world, with over 1.17 lakh Department for Promotion of Industry and Internal Trade (DPIIT)-recognized start-ups as of 2024. Amidst this growth, a persistent challenge remains: a significant proportion of start-ups fail within their first five years of operation, unable to navigate regulatory burdens, capital constraints, and market uncertainty. The Government of India has responded through a suite of tax incentive mechanisms under the Start-up India initiative, principally comprising a three-year income tax holiday under Section 80-IAC of the Income Tax Act, exemptions from angel tax under Section 56(2)(viib), and capital gains tax exemptions under Section 54EE and Section 54GB. This study examines whether these tax incentives have demonstrably improved the survival rates of start-ups in India. Drawing on secondary data from the DPIIT, the Ministry of Commerce and Industry, the Reserve Bank of India, World Bank Doing Business reports, and peer-reviewed academic literature, the study employs a descriptive research design to analyse longitudinal trends in start-up registrations, survival rates across sectors and funding stages, and the correlation between tax relief adoption and business longevity. Findings indicate a positive but conditional association between tax incentive access and improved start-up survival, modulated by sector, funding access, and founder awareness of available benefits. The study identifies critical gaps in policy reach particularly for micro-enterprises and non-technology start-ups and recommends targeted reforms to widen the tax incentive architecture.
Keywords: Tax Incentives, Start-up Survival Rate, Start-up India, Section 80-IAC, Angel Tax, DPIIT, Venture Capital, Entrepreneurial Finance, India Start-up Ecosystem, Income Tax Exemption
