One of the biggest financial benefits of being a recognised startup in India is the Section 80-IAC tax exemption — a 100% deduction on profits for three consecutive financial years. For a profitable early-stage company, this can save lakhs in taxes that you can reinvest into growth.
What is Section 80-IAC?
Section 80-IAC of the Income Tax Act allows an eligible startup to claim a 100% deduction on its profits and gains for any three consecutive years out of its first ten years since incorporation. You choose the three years — ideally the ones where your profits (and tax) are highest.
80-IAC Eligibility Checklist
- ✔ Incorporated as a Private Limited Company or LLP (proprietorships and partnerships don’t qualify).
- ✔ Incorporated on or after 1 April 2016 (check the current cut-off, which is extended periodically).
- ✔ DPIIT recognised startup.
- ✔ Annual turnover under ₹100 crore in the relevant financial year.
- ✔ Working towards innovation, development or improvement of products/services, or a scalable model with high potential for employment/wealth creation.
- ✔ Not formed by splitting up or reconstructing an existing business.
How to Apply for 80-IAC
- Ensure your startup is DPIIT recognised.
- Log in to the Startup India portal and open the 80-IAC exemption application.
- Upload the required documents (below).
- The application is reviewed by the Inter-Ministerial Board (IMB).
- On approval, claim the deduction in your income tax return for the chosen years.
Documents Required
- DPIIT recognition certificate
- Certificate of incorporation / registration
- Memorandum & Articles of Association (or LLP agreement)
- Audited financial statements and ITR for the relevant years
- A short write-up / pitch deck explaining innovation and scalability
80-IAC vs 56(2)(viib) “Angel Tax” Exemption
Don’t confuse the two. 80-IAC is a profit-linked income-tax holiday. The Section 56(2)(viib) exemption protects startups from “angel tax” on share premium raised above fair value. Many startups apply for both — they serve different purposes.
Frequently Asked Questions
Can I choose which 3 years to claim? Yes — pick any three consecutive years within your first ten years, ideally your most profitable.
Is IMB approval guaranteed after DPIIT recognition? No. DPIIT recognition is a prerequisite, but the IMB separately assesses innovation and scalability.
This guide is for general information only. Government scheme rules, fees and timelines change from time to time — verify the latest on the official portal or talk to a Consovia advisor before applying.