ICAI Firm Regn. No. 010699SMon–Sat, 9:00 AM – 7:00 PM
Registrations

Startup Tax Exemption — Section 80-IAC (now Section 140)

A DPIIT-recognised startup can apply to the Inter-Ministerial Board for a certificate that lets it deduct 100% of its profits for any three consecutive years out of its first ten. The deduction was Section 80-IAC of the 1961 Act and is Section 140 of the Income-tax Act, 2025, on the same terms. RITS & Associates prepares the application and plans which years to claim.

Updated September 2026ICAI FRN 010699S2-minute read

Who qualifies

  • DPIIT recognition as a startup.
  • Incorporated as a private limited company or LLP between 1 April 2016 and 31 March 2030.
  • Turnover not exceeding ₹100 crore.
  • Not formed by splitting up or reconstructing an existing business, or by transferring used plant and machinery beyond the permitted limit.
  • Working on innovation, development or improvement of products or processes, or a scalable business model with high potential for employment or wealth creation.

Choosing the three years

The three years can be any consecutive block within the first ten. Early years often have losses, so the deduction is usually worth most in the first profitable years. The choice needs projections, and the certificate should be in hand before the return for the first year claimed.

A company that opts for the concessional corporate tax regime can't also claim this deduction, so the two options need comparing. Minimum alternate tax may still apply to companies claiming the deduction under the old regime.

Documents required

  • DPIIT recognition certificate.
  • Certificate of incorporation and constitutional documents.
  • Financial statements and income-tax returns filed so far.
  • Description of the innovation or scalable business model, with evidence — patents, product documentation, traction.
  • Board resolution authorising the application.

The process

  1. Confirm DPIIT recognition

    Or apply for it first.

  2. Prepare the application

    The innovation case, financials and supporting evidence.

  3. File with the Inter-Ministerial Board

    Through the Startup India portal.

  4. Respond to queries

    The Board may ask for more information.

  5. Claim in the return

    Once certified, the deduction is claimed for the chosen years.

Practical notes from our engagements

  • DPIIT recognition assumed to be enough. The tax holiday needs the separate IMB certificate.
  • Innovation case written generically. The Board looks for something specific. Evidence helps.
  • Years chosen without projections. Claiming in loss years wastes the benefit.

How we handle the startup tax holiday

We check eligibility, prepare the IMB application with a specific innovation case, and plan the three years against projections so the deduction is used where it's worth most.

Frequently asked questions

What is Section 80-IAC?

The startup tax holiday under the 1961 Act — 100% deduction of profits for three consecutive years out of the first ten. Under the Income-tax Act, 2025 it is Section 140.

Who is eligible?

DPIIT-recognised private limited companies and LLPs incorporated between 1 April 2016 and 31 March 2030, with turnover up to ₹100 crore, holding a certificate from the Inter-Ministerial Board.

Is DPIIT recognition the same as the tax exemption?

No. Recognition is the first step; the tax holiday needs a separate certificate from the Inter-Ministerial Board.

Can we choose which three years?

Yes, any three consecutive years within the first ten from incorporation.

Does it apply under the 22% corporate tax regime?

No. A company opting for the concessional regime can't claim this deduction.

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