URL copied Budget 2021: What is Tax Holiday and how it will benefit startups in India? The Modi government on Monday proposed extension of the eligibility for claiming tax holiday and capital gains exemption for investment in startups till March 31, 2022. Finance Minister Nirmala Sitharaman in her speech said that the extension in eligibility for claiming tax holiday will incentivize startups in the country. What is Tax Holiday? A tax holiday is an incentive program run by the government. It helps to stimulate foreign investment by reducing taxes on businesses. The objective is to encourage economic activity and foster growth. The government's decision to extend the eligibility for claiming tax holiday will increase long-term tax revenue because they help businesses grow operations. A tax holiday is often temporary and revised by the government from time to time.