Introduction

Startups are often seen as growth-focused and not immediately profitable. While some believe that early-stage startups are exempt from tax scrutiny, the Income Tax Department does not exclude them from assessments and verifications. This article explores how and when startups can come under tax scrutiny, even in their initial years.

• Startup registration and exemption myths
  
• Angel tax and valuation issues
  
• TDS compliance and employee payments
  
• Mismatch in income and expenses
  
• Section 80-IAC and its conditions
  
• Importance of proper documentation and books
  
• Impact of funding rounds and investor scrutiny
  
• Best practices to avoid or prepare for scrutiny
  

Conclusion

Yes, startups can face income tax scrutiny even in the early stages, especially if there are discrepancies or funding involved. It is crucial for founders to maintain compliance from the start and prepare for possible queries or assessments.