This guide explains who qualifies for the 80-IAC exemption, which documents the Startup India portal asks for, how the application works; and what changed after the Income-tax Act, 2025 came into force on 1 April 2026.
What Is Section 80-IAC?
Section 80-IAC sits in Chapter VI-A of the Income-tax Act, 1961, under the heading 'special provision in respect of specified business'. It has been available since 1 April 2017 as part of the Startup India initiative. Its purpose is to leave more cash with early stage businesses while they build products, hire teams and find customers.
The deduction covers only profits and gains from an eligible business. This means a business engaged in innovation, development or improvement of products, processes or services, or one with a scalable model that has high potential for employment generation or wealth creation. Evidence of innovation and scalability therefore matters as much as the financial statements.
From 1 April 2026, the Income Tax Act, 2025, replaced the 1961 Act. The startup deduction continues as Section 140 of the new Act, while years up to 31 March 2026 remain governed by the old law.
How Much Tax Benefit Does 80-IAC Give?
As per a PIB release from the Ministry of Commerce and Industry, an eligible startup gets a 100% deduction on profits for any three consecutive years within a ten-year window from the date of incorporation.
The flexibility is valuable because most startups lose money early. A company incorporated in 2023 that turns profitable only in its fourth year does not waste the benefit on loss years. It can place the three-year block over the years when eligible profits actually arrive.
The ten-year window is counted from the year of incorporation, not from the date of approval. Delaying the application does not extend the window, so planning the three-year block early helps founders avoid missing their most profitable years.
For example, if a startup earns an eligible business profit of ₹40 lakh in each of three chosen years, the full ₹40 lakh is deducted every year, subject to audit and the other conditions of the section. Income from sources unrelated to the eligible business does not qualify.
Who Is Eligible for the 80-IAC Exemption?
A startup must satisfy every condition in the table below. Failing even one puts the application at risk.
| Condition | Requirement |
|---|---|
| Entity type | Private limited company or LLP |
| DPIIT recognition | Valid recognition as a startup |
| IMB certificate | Eligible business certificate from the Inter-Ministerial Board |
| Incorporation date | On or after 1 April 2016 and before 1 April 2030 |
| Time window | Deduction claimed within the first ten years from incorporation |
| Turnover | Not more than ₹100 crore in the year of claim |
| Business nature | Innovation, improvement of products or services, or a scalable model with job or wealth creation potential |
| Formation | Not formed by splitting up or reconstructing an existing business, and not by transferring previously used plant and machinery |
Rules on Used Machinery
The machinery condition has two limited exceptions. Professional commentary on the provision explains that imported second-hand machinery is not treated as previously used if it was never used in India and no depreciation was claimed on it earlier. Transferred used machinery is also tolerated when it does not exceed 20% of the total value of plant and machinery.
Who Cannot Claim 80-IAC?
Sole proprietorships, partnership firms and entities without DPIIT recognition fall outside the scope. Some online guides list registered partnership firms as eligible, but the Startup India portal names only private limited companies and LLPs. Businesses formed by reconstructing an existing entity are also excluded, except in the limited disaster-related cases covered by Section 33B of the Income-tax Act, 1961.
80-IAC vs DPIIT Recognition: What Is the Difference?
Many founders assume DPIIT recognition already delivers the tax holiday. It does not. Recognition is the entry point, and the 80-IAC certificate is a second approval with its own evaluation.
| Point | DPIIT Recognition | 80-IAC Certificate |
|---|---|---|
| Benefit | Startup status and access to government schemes | 100% deduction on eligible profits for three years |
| Sequence | First step | Second step, only after recognition |
| Evaluation | Recognition criteria | IMB scoring on innovation, wealth generation and employment |
Documents Required for 80-IAC
- The Startup India portal lists the following documents and declarations.
- Memorandum of Association (certified by an authorised signatory) or LLP deed, plus any relevant board resolution
- Shareholding pattern as per the MoA and the current shareholding structure
- Income tax return acknowledgements for the past three years or since incorporation
- CA certified balance sheet and profit and loss statement for the same period
- CA certified declaration that the startup was not formed by splitting up an existing business or by transferring previously used plant and machinery
- Declaration of scalability, if claimed: revenue growth above 10% in a year, 25% over two years or 33% over three years
- Startup video link, pitch deck and website URL
- Optional supporting proof such as credit rating, IPR filings, awards, funding records and HR declarations
Financial statement requirements depend on the age of the startup. Those between one and two years old submit the first year, those between two and three years old submit two years, and older startups submit the latest three financial years.
How to Apply for 80-IAC: Step by Step
- Confirm that your DPIIT recognition is active and log in to the Startup India portal.
- Open the Recognition menu and select Apply for Tax Exemptions.
- Review the recognition details fetched from your earlier form. If anything is outdated, correct it in the recognition form first.
- Fill in the 80-IAC details, including the MoA or LLP deed, shareholding, income tax return figures, video link, pitch deck, website and self certification.
- Complete the score card with annual accounts, the CA membership number, any credit rating and the scalability data.
- Answer the broad parameters on innovation, wealth generation and employment creation, and attach evidence for each.
- Accept the declaration and submit. Watch the portal for clarification queries from the board.
According to the PIB release, complete applications are now reviewed within 120 days under the revised framework.
How Is an 80-IAC Application Evaluated?
- The board looks at three groups of parameters on the application form.
- Innovation: IPR status from not filed to granted, awards from district to national level, stage of the product and the share of employees holding or pursuing an M.Tech or PhD
- Wealth generation: external funding obtained, revenue generated and profitability
- Employment creation: direct employment, the share of women, persons with disabilities and SC or ST employees, and the share of employees based outside metro cities
DPIIT has advised unsuccessful applicants to strengthen their case on technological innovation, market potential, scalability and contribution to employment. The same release reports that more than 3,700 startups had received the exemption by May 2025, including 187 cleared across two board meetings.
Practical Tips Before You Apply
- Keep every CA certified document consistent with the figures in your income tax returns.
- Print declarations on company letterhead. The scalability declaration must be signed by directors or partners and certified by a CA with a stamp and membership number.
- Follow the official video and pitch deck guidelines published for Form 80-IAC.
- Obtain a credit rating from an accredited agency if possible. The portal calls it optional but highly recommended.
- Respond to clarification queries on the portal without delay.
What Happens After Approval?
Approval does not end the compliance work. The accounts of the eligible business must be audited by an accountant and the audit report filed by the specified date. Profits are computed as if the eligible business were the only source of income, and the same profit cannot be deducted twice under another provision.
Minimum Alternate Tax also needs attention. Under the earlier law, MAT under section 115JB could apply even in exemption years, with the tax paid carried forward as credit for up to 15 years, according to B C Shetty & Co. Founders should confirm the current position and their choice of tax regime with a chartered accountant before filing.
What Changed for 80-IAC in 2026?
The Union Budget 2025-26 extended eligibility to startups incorporated before 1 April 2030, as confirmed in the PIB release. Older guides that stop at 1 April 2025 are outdated.
The Income Tax Act, 2025, took effect on 1 April 2026. The startup deduction now sits in Section 140, and the tax year replaces the assessment year.
The core benefit of a 100% deduction for three years out of ten remains the same.
Frequently Asked Questions
What is 80-IAC?
80-IAC is a section of the Income Tax Act, 1961 that lets eligible startups deduct 100% of profits from an eligible business for three consecutive years within their first ten years. Eligible startups must be DPIIT recognised private limited companies or LLPs holding an Inter-Ministerial Board certificate. From 1 April 2026, the equivalent provision is Section 140 of the Income-tax Act, 2025.
Is the 80-IAC exemption automatic after DPIIT recognition?
No. DPIIT recognition only gives startup status. The 80-IAC exemption needs a separate application on the Startup India portal, followed by evaluation and certification by the Inter-Ministerial Board. A startup can claim the deduction in its return only after the certificate is issued and the other conditions of the section are met.
Can a partnership firm or sole proprietorship claim 80-IAC?
No. The Startup India portal names only private limited companies and LLPs as eligible entities. Owners of other business forms should take advice from a chartered accountant before restructuring, because the exemption also excludes startups formed by reconstructing an existing business.
Can a startup choose which three years to claim?
Yes. The startup picks any three consecutive financial years out of the first ten years from incorporation. Most founders place this block over the years when the business starts earning profits, since the deduction only helps when there are eligible profits to deduct.
What is the turnover limit for 80-IAC?
Turnover must not exceed ₹100 crore in the year for which the deduction is claimed. The Startup India acknowledgement also asks applicants to confirm that turnover has not crossed ₹100 crore in any financial year since incorporation, so founders should check both figures before applying.
How long does 80-IAC approval take?
DPIIT stated in May 2025 that complete applications are reviewed within 120 days under the revised framework. Replying quickly to clarification queries on the portal helps keep the application moving. Incomplete or inconsistent documents can extend the process, so the application should be checked carefully before submission.
What replaced Section 80-IAC under the Income-tax Act, 2025?
The benefit continues as Section 140 of the Income-tax Act, 2025, which took effect on 1 April 2026. The structure is similar, with a 100% deduction for three consecutive tax years chosen from the first ten years. Tax year replaces the term assessment year, and the 1961 Act continues to govern earlier years.
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