India’s startup ecosystem is booming — and to support this growth, the Government of India introduced Section 80-IAC under the Income Tax Act, offering a 100% tax holiday for eligible startups.
If you’re a founder or planning to start a business, this 3-year income tax exemption could help you save lakhs of rupees in taxes during your early, critical growth years.
Let’s explore everything you need to know about Section 80-IAC, step-by-step.
What is Section 80-IAC?
Section 80-IAC provides 100% income tax exemption for any three consecutive years out of the first ten years since incorporation, only for eligible startups.
This scheme was introduced to:
- Encourage entrepreneurship
- Reduce early-stage financial stress
- Help startups reinvest profits in scaling their businesses
Eligibility Criteria for Claiming Section 80-IAC Benefits
To claim this benefit, your startup must strictly meet the following eligibility conditions:
- Type of Entity
- Must be either a:
- Private Limited Company, or
- Limited Liability Partnership (LLP)
❌ Sole proprietorships or partnership firms are not eligible.
Date of Incorporation
- The startup must be incorporated between
📅April 1, 2016 to March 31, 2030
The deadline was earlier March 31, 2023, but has now been extended to 2030 under Union Budget announcements to continue supporting Indian startups.
Annual Turnover
- Turnover must not exceed ₹100 crore in any of the financial years since incorporation.
Even if your turnover touches ₹101 crore in a year, you may lose eligibility.
Innovation-Driven Business
- Your startup must be working on innovation, technology, or a scalable business model with high potential for employment generation or wealth creation.
You must clearly demonstrate originality, product/process improvement, or disruption in your application.
DPIIT Recognition
- Your startup must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT).
DPIIT recognition is the gateway to all Startup India benefits, including tax exemption.
What Exactly is the Tax Benefit?
- 100% tax exemption on profits for 3 consecutive assessment years (out of the first 10 years).
- You can choose any 3 years, but they must be consecutive.
- You can delay using this benefit and apply it only in the years where your startup is profitable, to maximize tax savings.
Step-by-Step Process to Claim Section 80-IAC
Here is a simplified breakdown of the entire process:
🔹 Step 1: Register Your Company
- Incorporate your startup as a Private Limited Company or LLP with the Ministry of Corporate Affairs (MCA).
🔹 Step 2: Apply for DPIIT Recognition
- Visit the Startup India portal
- Create a profile and submit an application for DPIIT recognition
- Required documents include:
- Certificate of Incorporation
- Details of business and team
- Pitch deck or video link explaining innovation
- Website URL (if any)
- PAN of company and directors/partners
Approval takes time — anywhere from 3 weeks to 3 months, depending on your documents and business model.
🔹 Step 3: File Form 10-IAC
Once DPIIT recognition is received:
- Log in to the Income Tax e-Filing portal
- File Form 10-IAC under the “Startup Tax Exemption” section
- Include:
- DPIIT Certificate
- ITR and audit reports (if applicable)
- Declaration on innovation and eligibility
🔹 Step 4: Claim the Tax Holiday in the Chosen 3 Years
- After approval from CBDT (Central Board of Direct Taxes), claim exemption in the selected 3 consecutive profitable years
- Mention the exemption under “Section 80-IAC” while filing the ITR
- Ensure proper audit and documentation
📌 Once you choose the 3 years, you cannot change them later