Section 80-IAC Income Tax Exemption for Startups – Full Guide (2025)

 

Section 80-IAC Income Tax Exemption for Startups – Full Guide (2025)

Startups in India are the backbone of innovation and economic growth. Recognizing this, the Indian government introduced Section 80-IAC under the Income Tax Act to give DPIIT-recognized startups a powerful incentive—100% income tax exemption for 3 consecutive financial years within their first 10 years of incorporation.

In this blog, we explain the eligibility, benefits, and how to claim this tax relief—especially helpful for startups based in Karnataka and across India.

✅ What is Section 80-IAC?

Section 80-IAC of the Income Tax Act allows eligible startups to claim 100% tax exemption on profits for any 3 consecutive years out of the first 10 years of incorporation.

This benefit helps reduce the financial burden on early-stage startups, allowing them to focus on growth, innovation, and scalability.

🏢 Who is Eligible?

To claim exemption under Section 80-IAC, your startup must meet the following conditions:

  1. Incorporation: Must be incorporated as a Private Limited Company or LLP.

  2. Time Limit: Incorporated on or after April 1, 2016, but before April 1, 2026.

  3. Turnover: Annual turnover should not exceed ₹100 crores in any previous financial year.

  4. Innovation: The startup must be working towards innovation, improvement of existing products/services, or development of new products/processes.

  5. Recognition: Must be recognized by DPIIT (Department for Promotion of Industry and Internal Trade).

  6. Original Entity: Should not be formed by splitting or reconstructing an existing business.

🧾 Benefits of Section 80-IAC for Startups

  • 💸 100% Tax Holiday: No income tax on profits for 3 years (out of the first 10).

  • 🚀 More Capital Retention: Funds saved from tax can be reinvested into the business.

  • 📈 Boost in Growth: Encourages faster expansion and operational freedom.

  • 🧠 Focus on Innovation: Removes early-stage financial pressure to promote R&D.

📋 How to Avail the Section 80-IAC Benefit?

Follow these steps to apply for the tax exemption:

  1. Get DPIIT Recognition

    • Apply on the Startup India portal (www.startupindia.gov.in)

    • Submit required documents: Incorporation certificate, business description, PAN, etc.

  2. File Form 80-IAC Application

    • Once DPIIT recognition is done, apply for tax exemption through the Income Tax e-filing portal.

    • Attach your DPIIT certificate and necessary documents.

  3. Approval from CBDT (Central Board of Direct Taxes)

    • Your application will be reviewed by the Income Tax Department and approved based on merit.

  4. Claim in ITR

    • Once approved, you can claim the deduction while filing your Income Tax Return for the relevant 3 years.

📌 Important Points to Remember

  • You can choose any 3 years within the first 10 years of incorporation.

  • The exemption is available only after approval from the CBDT.

  • DPIIT recognition is mandatory to apply under this section.

  • Ensure you maintain proper books of accounts and comply with audit requirements.

💡 Example Scenario

A startup incorporated in Bangalore, Karnataka in 2021 and recognized by DPIIT in 2022 can choose to claim 100% exemption in FY 2023–24, 2024–25, and 2025–26 based on profitability and strategy.

📞 Need Help with DPIIT Recognition or Tax Filing?

RapidTaxO is your trusted partner for:

✅ Hassle-free process
✅ Affordable packages
✅ Expert CA support

📲 Contact Us:

📧 Email: support@rapidtaxo.com
 📞 Call/WhatsApp: +91 96355 25505
 🌐 Website: www.rapidtaxo.com

🔚 Conclusion:

Section 80-IAC is a game-changing opportunity for startups in India to save taxes and grow faster. If your business meets the eligibility and is DPIIT-recognized, don’t miss this chance to claim a 3-year tax holiday.

Let RapidTaxO assist you in claiming this powerful startup benefit—legally, quickly, and affordably.

🔍 FAQs

Q1: Is Section 80-IAC applicable to all startups?
 No, only DPIIT-recognized startups incorporated after April 1, 2016, and before April 1, 2026, are eligible.

Q2: Can a startup choose any 3 years for exemption?
 Yes, any 3 consecutive years within the first 10 years of incorporation.

Q3: Is the exemption automatic after DPIIT recognition?
 No, you must still apply through the Income Tax portal and get approval from CBDT.

Q4: What is the maximum turnover limit?
 ₹100 crores in any of the previous financial years.

Location: India

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