Start-ups in India can benefit from significant tax exemptions under Section 80-IAC of the Income-tax Act, designed to support innovation and entrepreneurship.
Key Features of the Exemption
- 100% tax deduction on profits for 3 consecutive years out of the first 10 years since incorporation.
- Available to DPIIT-recognized start-ups that are:
- Incorporated as a Private Limited Company or LLP
- Engaged in an eligible business (innovation, development, or scalable models with job/wealth creation potential)
- Have a turnover of less than ₹100 crore in any previous year
Budget 2025 Update
The eligibility window for incorporation has been extended to 31 March 2030, allowing more start-ups to qualify for the tax holiday.
Additional Relief – Angel Tax Exemption (Section 56)
Recognized start-ups can also apply for exemption from Angel Tax under Section 56(2)(viib), provided:
- Aggregate paid-up capital and share premium after issue does not exceed ₹25 crore
- The investor and investment meet prescribed conditions
You can apply for both exemptions through the Startup India portal after obtaining DPIIT recognition.
