Startup Tax Exemption under Section 80-IAC
100% deduction of profits for any three consecutive years out of your first ten — approved by the Inter-Ministerial Board for eligible DPIIT-recognised startups.
- 100% profit deduction
- Any 3 of first 10 years
- DPIIT recognition required
- IMB approval
At a Glance
- Deduction
- 100% of profits
- Period
- 3 consecutive years
- Window
- Within first 10 years
- Turnover limit
- ₹100 Cr
- Approved by
- Inter-Ministerial Board
What Is 80-IAC Tax Exemption?
Section 80-IAC of the Income Tax Act allows an eligible startup to deduct 100% of its profits and gains from business for any three consecutive assessment years out of the first ten years from incorporation. You choose which three — which matters, because claiming the deduction in years when you are barely profitable wastes it. The sensible approach is to elect the three years in which you expect the highest taxable profit.
Eligibility is narrower than DPIIT recognition. The entity must be a private limited company or an LLP (partnership firms are excluded here even though they qualify for recognition), must be DPIIT-recognised, must have been incorporated within the qualifying window, must have turnover below ₹100 crore in the year the deduction is claimed, and must not have been formed by splitting up or reconstructing an existing business or by transferring old plant and machinery beyond the permitted limit.
Approval does not come automatically with recognition. A separate application goes to the Inter-Ministerial Board, which evaluates the innovation, scalability and employment or wealth creation potential of the business. The Board is meaningfully more selective than the recognition process, and a weak application here is the most common reason startups end up paying tax they could have avoided.
Related Startup Tax Benefits
Section 80-IAC deduction
100% × 3 yearsThe core benefit — full deduction of business profits for three consecutive years chosen from the first ten years after incorporation.
- You choose which three years
- Requires IMB approval
- Pvt Ltd and LLP only
Carry forward of losses
Relaxed conditionEligible startups get a relaxation in the shareholding continuity condition for carrying forward and setting off losses after a change in shareholding.
- Helps after funding rounds
- Subject to original shareholder conditions
- Applies to recognised startups
Capital gains relief
On reinvestmentSpecified exemptions on long-term capital gains where the proceeds are invested in eligible startups or notified funds, subject to conditions.
- Conditions and limits apply
- Lock-in on the new investment
- Advice needed case by case
IPR fee rebates
80% / 50%Not a tax benefit strictly, but the other major cost saving that comes with recognition — rebates on patent and trademark filing fees.
- 80% on patents
- 50% on trademarks
- Facilitator fees borne by government
Benefits
What you actually gain from 80-IAC Tax Exemption.
Cash retained when it matters most
Three years of zero tax on profits at the point where the business first becomes profitable is capital you redeploy into growth rather than remit.
You pick the three years
The deduction is for three consecutive years of your choosing within the first ten, so it can be timed to your most profitable stretch rather than wasted early.
Improves your runway maths
Investors model post-tax cash. An approved 80-IAC exemption changes your projections materially and is a fair point to raise in a funding conversation.
Signals a vetted business
IMB approval is a substantive review of innovation and scalability, which carries weight in diligence beyond the tax saving itself.
Eligibility
Check where you stand before applying — we confirm all of this on the first call anyway.
Entity conditions
- Must be a private limited company or a limited liability partnership — registered partnership firms are not eligible for 80-IAC even if DPIIT-recognised.
- Must hold a valid DPIIT recognition certificate.
- Incorporated within the qualifying window prescribed under the section, which has been extended by successive Finance Acts.
- Total turnover must not exceed ₹100 crore in the previous year relevant to the assessment year in which the deduction is claimed.
- Not formed by splitting up or reconstruction of a business already in existence.
Business conditions
- Engaged in innovation, development or improvement of products, processes or services, or a scalable model with high potential for employment or wealth creation.
- Not formed by transfer of plant and machinery previously used, beyond the proportion permitted under the section.
- The deduction is on business profits — the return must be filed within the due date and accounts audited where required.
- The three years must be consecutive and fall within the first ten years from incorporation.
Documents Required
Entity & recognition documents
- DPIIT recognition certificate
- Certificate of Incorporation and PAN of the entity
- MOA and AOA, or the LLP agreement
- Current shareholding pattern and details of any funding received
- Board resolution authorising the application
Financial & business documents
- Audited financial statements since incorporation
- Income tax returns filed to date
- Annual accounts with the auditor's report
- Pitch deck and a detailed note on the innovation and scalability
- Patent, trademark or product documentation supporting the innovation claim
- Employment data and revenue growth figures
How We Help You Get 80-IAC Tax Exemption
What we handle for you, and the order we do it in.
Eligibility and timing advice
Whether you qualify, and more importantly which three years you should elect to maximise the value of the deduction.
DPIIT recognition first
If you are not yet recognised, we handle that application as a prerequisite before the 80-IAC filing.
IMB application drafting
The innovation and scalability case built for a materially stricter reviewer than the recognition process, with financial and employment evidence attached.
Financial documentation
Coordination with your auditor so audited statements, returns and the annexures are consistent and complete.
Query handling
Response to any clarification the Inter-Ministerial Board raises, and resubmission where the application is returned.
Claim guidance
How to actually claim the deduction in the return once approved, and the compliance conditions that keep it from being disturbed later.
Step by step
- 1
Eligibility and year-election review
2 – 3 daysWe confirm entity type, incorporation window and turnover, then model which three years give you the largest benefit.
- 2
DPIIT recognition, if needed
7 – 15 daysRecognition is a precondition. Where you do not already hold it, we file that application first.
- 3
Application preparation
5 – 10 daysInnovation and scalability note, financial annexures, employment data and supporting evidence assembled into the IMB application.
- 4
Filing with the Board
1 – 2 daysSubmission through the Startup India portal to the Inter-Ministerial Board, with acknowledgement shared with you.
- 5
Board review
45 – 120 daysThe Board evaluates the application in its scheduled meetings. We track status and respond to any clarification raised.
- 6
Claiming the deduction
At return filingOnce approved, we guide the actual claim in the income tax return and the conditions to maintain so it holds up on assessment.
Why Choose SetuBridge
What working with us is actually like.
We tell you when the answer is no
If you are not eligible, or the timing is wrong, or your credit record needs fixing first, we say so on the first call — before you have paid us anything.
One team, start to finish
The same people who assess your case prepare the file and follow it up. You are not handed to a different desk after the sale, and you never re-explain your business.
700+ businesses, ₹103 Cr+ facilitated
We have run this process across 28 states and most sectors, so we know which departments, portals and branches move quickly and which need chasing.
Fees agreed in writing, upfront
You know the cost before work starts. We never ask you to pay anything to a government official or bank employee, and no legitimate consultant will.
Follow-up is the actual work
Most applications do not fail at filing — they stall at an unanswered query or a missed deadline. Chasing those to closure is the bulk of what we do for you.
You keep every document
Certificates, acknowledgements, login credentials and filed copies are handed over to you. Nothing is held back to keep you dependent on us.
₹103 Cr+
Funding facilitated
700+
Businesses helped
85%
Success rate
28
States covered
Frequently Asked Questions
A 100% deduction of profits and gains from your eligible business for three consecutive assessment years, chosen from the first ten years since incorporation. In practical terms, no income tax on business profits for those three years.
Related Services
Startup India Recognition (DPIIT Certificate)
DPIIT recognition — the gateway to every Startup India benefit.
Startup Funding — Seed to Series A
Seed funds, angel and VC readiness for DPIIT-recognised startups.
Company Incorporation in India
Pvt Ltd, LLP, OPC and partnership registration, end to end.
Government fees, scheme limits and eligibility norms are revised from time to time. Figures on this page are indicative — our team confirms the rules in force on the day of filing before you commit to anything.
Apply for your 80-IAC tax exemption
Talk to a SetuBridge advisor. We'll tell you honestly whether this is the right fit for your business — no charge for the first conversation.