80 IAC Tax Exemption – Complete Guide for Startups

Key Insights 

1. If your startup is eligible, you can claim the 80 IAC exemption for any three of your first ten years. This means you can deduct all your profits and put them back into your business. However, remember that MAT might still apply.

2. To qualify, your startup must have DPIIT recognition, be incorporated before March 2030, have a turnover below ₹100 crore, and offer a business model that is both scalable and innovative.

3. You can apply for the 80 IAC exemption on the Startup India portal. Make sure you have key documents like your financial statements and a pitch deck ready for certification.

Is your startup registered? Check for the 80 IAC tax exemption eligibility and save on taxes. Make sure your 80 IAC exemption registration is complete with DPIIT.

The 80 IAC tax exemption for startups works like a government grant, supporting your innovation. It lets you deduct 100% of your profits for any three years within your first ten, helping you grow faster. 

Just remember, the 80 IAC tax exemption MAT applicability still applies and sets a lower limit on how little tax you can pay.

Last year, my tech startup completed its 80 IAC tax exemption registration. In 2024-25, we earned a profit of ₹50,00,000. Thanks to the 80 IAC exemption, our taxable income became zero, which saved us ₹12,50,000 in taxes. Still, MAT was charged on our book profits.

Eligibility Criteria for 80 IAC Tax Exemption

Is your startup ready to lead in innovation? Learn the exact eligibility criteria to qualify for a 100% tax exemption under Section 80 IAC.

• The assessee must be a limited liability partnership (LLP) or a company that runs an eligible business. An eligible business is one run by a startup that innovates, develops, or improves products, processes, or services, or uses a scalable business model that can create jobs or generate wealth.
• The company or LLP must be incorporated after March 31, 2016 and before March 31, 2030.
• The company or LLP’s annual turnover must not exceed Rs. 100 Crore in the year before the assessment year for which the deduction is claimed under section 80-IAC.
• The startup must be recognised by the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion (DIPP), Government of India.
• The startup must have a certificate of eligible business from the Inter-Ministerial Board of Certification, as published in the Official Gazette by the Indian Central Government.
• The company or LLP must not be formed by splitting up or reorganising an existing business.

To qualify for a tax holiday, make sure you incorporate your business on time, get DIPP recognition, and build a scalable, innovative business with a turnover below ₹100 crore.

Bonus Tip: Do you know? The total paid-up share capital and share premium of the Startup, after the proposed share issue if any, must not exceed ₹25 Crore. To qualify for an angel tax exemption under Section 56(2)(viib) of the Income Tax Act, 1961, DPIIT-recognised startups must not exceed ₹25 Crore in total paid-up share capital and share premium.

What are the Advantages of Claiming the Deduction?

Use the 80 IAC deduction to turn your profits into capital you can reinvest. This approach can help your startup grow more quickly and improve your financial stability.

• You can claim a deduction equal to 100% of the profits and gains from eligible businesses for three straight assessment years.
• If your business closes before the assessment year ends, you may be able to increase or carry forward your losses.
• This deduction is open to everyone, including individuals, Hindu Undivided Families (HUFs), companies, and trusts.
• You can use this deduction to reduce taxes on other income, like salary, interest, or dividends.
• You do not need to make advance tax payments to claim this deduction.

Take advantage of a three-year tax holiday on profits to help your startup grow. Use the extra cash flow to reinvest and move your business forward faster.

How to Apply for Exemptions Under Section 80-IAC?

Follow each step carefully when applying. To get your 80 IAC tax exemption, you need to take a clear, step-by-step approach for DPIIT recognition and certification.

Step 1: Log in to the Startup India portal. Follow the instructions on the screen to apply for the DPIIT recognition certificate using the Startup India registration process.

Step 2: Choose the 'claim tax exemption' option and fill out the form with these details:
 

• Name of the startup
• Date of incorporation
• Address and business location
• Incorporation/registration number
• Nature of business (LLP or Private Limited Company)
• DIPP number
• Contact details (email ID, phone number, and PAN number of the entity)

Step 3: To claim deductions under Section 80-IAC, submit these documents in PDF format:
 

• Limited Liability Partnership Deed (for LLPs)
• Memorandum of Association (for PLCs)
• Board Resolution (if applicable)
• CA-certified balance sheet and Profit and Loss statements
• Financial statements for the last three years or from the date of establishment
• Income Tax Returns for the last three years or from the date of establishment
• A link to a video pitch of the startup
• Pitch Deck in PDF format

First, register on the portal and upload your documents to get your 80 IAC certification. This can help you qualify for significant tax savings. 

Conclusion

Section 80 IAC allows eligible startups to deduct all of their profits for three years. This makes it easier for them to put money back into their business and grow. Startups that meet DPIIT recognition, turnover, and innovation requirements and complete the certification process can save a lot. It is also important to consider the MAT rules to get the most benefit.

FAQS 

Has anyone availed a tax exemption for startups under Section 80 IAC? 

Yes, many startups have availed the tax exemption under Section 80-IAC of the Income Tax Act. Companies like Meesho and Razorpay are examples of startups that used this benefit to reinvest in their growth.

What is next after getting recognised by DPIIT and Startup India?  

After you get DPIIT or Startup India recognition, take advantage of benefits like funding, tax exemptions, government procurement opportunities, and networking in the startup community. Work on a solid pitch deck, update your financial documents, and reach out to investors or incubators. The first 100 days are key to making the most of these opportunities.

Will I get 100% tax exemption if my company is registered as a startup by DIPP?  

No, simply registering with DPIIT (formerly DIPP) does not guarantee a full tax exemption. You also need to meet certain criteria and apply for the benefit under Section 80-IAC of the Income Tax Act.

Can my startup get a tax exemption?  

If your startup meets the criteria and is recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), you may be eligible for tax exemptions through the Indian government's Startup India initiative.

What is section 80-IAC of the Income Tax Act?

Section 80-IAC is a tax benefit from the Central government for eligible startups. It allows them to deduct 100% of their profits and gains from eligible businesses.

 

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