Section 80-IAC: Tax Deduction for Eligible Start-ups

Applicable to: DPIIT-recognized startups (Private Companies/LLPs)

This section provides a 100% tax deduction on profits for eligible startups for 3 consecutive years within their first 10 years of incorporation, fostering innovation and economic growth .

Table of Contents

Key Features (AY 2025-26)

1. Eligibility Criteria

Entity Type:Private Limited Company or LLP .
Incorporation Period:Between 1 April 2016 – 31 March 2030 (extended in Budget 2025).
Annual Turnover:Must not exceed ₹100 crore in any financial year.
DPIIT Recognition:Mandatory (via Startup India portal).
Business Nature:Must focus on innovation, scalability, or employment generation (excludes real estate, trading, etc.).

2. Deduction Details

100% profit exemptionfor 3 consecutive years (chosen within first 10 years).
No advance tax liabilityduring exemption years.
Excludes:Income from dividends, capital gains, or non-business activities.

3. Application Process

Obtain DPIIT Recognition(via Startup India Portal).
Submit Form 80-IACwith:

- Audited financials (3 years or since incorporation).
- Board resolution & shareholding pattern.
- Proof of innovation (patents, pitch deck, awards) .

IMB Certification:Approval from Inter-Ministerial Board (takes 3–9 months) .

Recent Updates (Budget 2025)

Extension:Eligibility window extended to startups incorporated till 31 March 2030 .
Faster Approvals:DPIIT now processes applications within 120 days.

Comparison with Similar Sections

SECTION	BENEFIT	ELIGIBILITY
80-IAC	100% profit exemption (3 years)	Startups (2016–2030)
80-IB	Partial deduction (SMEs)	Manufacturing units
54GB	Capital gains exemption	Investors in startups

Pro Tips for Startups

Plan Tax Holiday Timing:Opt for exemption during peak profit years (e.g., scaling phase).
Maintain Compliance:Submit annual audited reports to retain benefits.
Combine with Other Incentives:Explore Angel Tax exemption (Section 56) for investor funds.

FAQs

Q: Can a startup claim 80-IAC after 10 years?
A: No, deductions must be claimed within 10 years of incorporation.

Q: Is the exemption available for foreign-funded startups?
A: Yes, if DPIIT-recognized and meeting other criteria.

Q: What if a startup’s turnover exceeds ₹100 crore?
A: Disqualified for that financial year.

Section 80-IAC is a game-changer for startups, offering significant tax relief during critical growth phases. With the 2030 extension, more ventures can now qualify.