{"id":2128,"date":"2025-05-20T16:20:42","date_gmt":"2025-05-20T10:50:42","guid":{"rendered":"https:\/\/www.caclubindia.com\/guide\/?p=2128"},"modified":"2025-06-26T15:55:11","modified_gmt":"2025-06-26T10:25:11","slug":"section-80iac-start-up-tax-benefits","status":"publish","type":"post","link":"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/","title":{"rendered":"Section 80-IAC: Start-up Tax Benefits Get 5-Year Lifeline"},"content":{"rendered":"\n<p>As per the <strong>Income Tax Act (Section 80-IAC)<\/strong>, a <strong>startup<\/strong> is an entity (company or LLP) incorporated between <strong>April 2016 and March 2028<\/strong>, with annual turnover not exceeding <strong>\u20b9100 crore<\/strong>, recognized by <strong>DPIIT<\/strong>, and engaged in an innovative business (excluding traditional sectors like real estate or agriculture), eligible for a <strong>100% tax deduction on profits for 3 out of 10 years<\/strong>.<\/p>\n\n\n\n<p>Under the Startup India Action Plan, startups that qualify as per the definition outlined in <strong>G.S.R. notification 127(E)<\/strong> can seek recognition under the program. Applicants must submit the required supporting documents along with their application.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\r\n<div class=\"ez-toc-title-container\">\r\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\r\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\r\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Recognition\" >Recognition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Certification_for_the_purposes_of_section_80-IAC_of_the_Act\" >Certification for the purposes of section 80-IAC of the Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Exemption_for_the_purpose_of_clause_viib_of_sub-section_2_of_section_56_of_the_Act\" >Exemption for the purpose of clause (viib) of sub-section (2) of section 56 of the Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Revised_Eligibility_Period_for_Startups\" >Revised Eligibility Period for Startups<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Tax_Benefits\" >Tax Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Government_Approvals\" >Government Approvals<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#Eligibility_Requirements\" >Eligibility Requirements<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\r\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Recognition\"><\/span>Recognition<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The process of recognition of an eligible entity as a startup shall be as under:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A Startup shall make an online application over the mobile app or portal set up by the DPIIT.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The application shall be accompanied by\u2014<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li>a copy of Certificate of Incorporation or Registration, as the case may be, and<\/li>\n\n\n\n<li>a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit, \u2014<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li>recognise the eligible entity as Startup; or<\/li>\n\n\n\n<li>reject the application by providing reasons.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Certification_for_the_purposes_of_section_80-IAC_of_the_Act\"><\/span>Certification for the purposes of section 80-IAC of the Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Startup being a private limited company or limited liability partnership, which fulfils the conditions specified in sub-clause (i) and sub-clause (ii) of the Explanation to section 80-IAC of the Act, may, for obtaining a certificate for the purposes of section 80-IAC of the Act, make an application in Form-1 along with documents specified therein to the Board and the Board may, after calling for such documents or information and making such enquires, as it may deem fit, \u2014<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>grant the certificate referred to in sub-clause (c) of clause (ii) of the Explanation to section 80- IAC of the Act; or<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>reject the application by providing reasons.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exemption_for_the_purpose_of_clause_viib_of_sub-section_2_of_section_56_of_the_Act\"><\/span>Exemption for the purpose of clause (viib) of sub-section (2) of section 56 of the Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Act and consequent exemption from the provisions of that clause, if it fulfils the following conditions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>it has been recognised by DPIIT under para 2(iii)(a) or as per any earlier notification on the subject<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>aggregate amount of paid-up share capital and share premium of the startup after issue or proposed issue of shares, if any, does not exceed twenty-five crore rupees.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It has not invested in any of the following assets,\u2500<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li>building or land appurtenant thereto, being a residential house, other than that used by the Startup for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business;<\/li>\n\n\n\n<li>land or building, or both, not being a residential house, other than that occupied by the Startup for its business or used by it for purposes of renting or held by it as stock-in trade, in the ordinary course of business;<\/li>\n\n\n\n<li>loans and advances, other than loans or advances extended in the ordinary course of business by the Startup where the lending of money is substantial part of its business;<\/li>\n\n\n\n<li>capital contribution made to any other entity;<\/li>\n\n\n\n<li>shares and securities;<\/li>\n\n\n\n<li>a motor vehicle, aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees, other than that held by the Startup for the purpose of plying, hiring, leasing or as stock-intrade, in the ordinary course of business;<\/li>\n\n\n\n<li>jewellary other than that held by the Startup as stock-in-trade in the ordinary course of business;<\/li>\n\n\n\n<li>any other asset, whether in the nature of capital asset or otherwise, of the nature specified in sub-clauses (iv) to (ix) of clause (d) of Explanation to clause (vii) of sub-section (2) of section 56 of the Act.<\/li>\n<\/ol>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"1000\" src=\"https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Tax-Relief-Revised-us-80-IAC.png\" alt=\"\" class=\"wp-image-2130\" srcset=\"https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Tax-Relief-Revised-us-80-IAC.png 800w, https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Tax-Relief-Revised-us-80-IAC-240x300.png 240w, https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Tax-Relief-Revised-us-80-IAC-768x960.png 768w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Revised_Eligibility_Period_for_Startups\"><\/span>Revised Eligibility Period for Startups<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Startups incorporated on or before <strong>April 1, 2030<\/strong>, can now qualify for tax exemption under <strong>Section 80-IAC<\/strong>, extending the previous deadline.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_Benefits\"><\/span>Tax Benefits<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Eligible startups can enjoy a <strong>100% tax deduction<\/strong> on profits for <strong>three consecutive financial years<\/strong> within the first <strong>ten years<\/strong> of incorporation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Government_Approvals\"><\/span>Government Approvals<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>Department for Promotion of Industry and Internal Trade (DPIIT)<\/strong> has recently granted approval to <strong>187 startups<\/strong> for this tax benefit. Since the scheme&#8217;s launch, more than <strong>3,700 startups<\/strong> have availed of this incentive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_Requirements\"><\/span>Eligibility Requirements<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To qualify for the <strong>Section 80-IAC tax exemption<\/strong>, startups must meet the following criteria:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Be officially <strong>recognized by DPIIT<\/strong>.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Be structured as a <strong>private limited company<\/strong> or a <strong>Limited Liability Partnership (LLP)<\/strong>.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Be incorporated <strong>between April 1, 2016, and April 1, 2030<\/strong> (as per the extended deadline).<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Have an <strong>annual turnover not exceeding \u20b9100 crore<\/strong> in the financial year for which the deduction is claimed.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Be involved in <strong>innovation, development, or enhancement of products, processes, or services,<\/strong> or possess a <strong>scalable business model<\/strong> with significant potential for <strong>employment generation or wealth creation<\/strong>.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Not be formed by splitting or restructuring an existing business (with certain exceptions).<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Use <strong>new plant and machinery<\/strong>, though some exceptions apply for previously used imported machinery.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"800\" src=\"https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Section-80IAC-Tax-Exemption.png\" alt=\"\" class=\"wp-image-2129\" srcset=\"https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Section-80IAC-Tax-Exemption.png 600w, https:\/\/www.caclubindia.com\/guide\/wp-content\/uploads\/2025\/05\/Section-80IAC-Tax-Exemption-225x300.png 225w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1747735989242\"><strong class=\"schema-faq-question\">How many years can a company be called a startup?<\/strong> <p class=\"schema-faq-answer\">The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership. Turnover should be less than INR 100 Crores in any of the previous financial years. An entity shall be considered as a startup up to 10 years from the date of its incorporation.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1747736003216\"><strong class=\"schema-faq-question\">What is 80IAC-exempted startups?<\/strong> <p class=\"schema-faq-answer\">The Income Tax Exemption under Section 80-IAC is a key incentive under the Government of India&#8217;s Startup India initiative. Eligible startups can avail of a 100% tax deduction for three consecutive financial years within their first ten years of incorporation.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1747736110112\"><strong class=\"schema-faq-question\">What is Section 79 of Income Tax Act for startups?<\/strong> <p class=\"schema-faq-answer\">Section 79 of the Income Tax Act, 1961, restricts a company from carrying forward and setting off its past losses if there is a substantial change in shareholding.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1747736167782\"><strong class=\"schema-faq-question\">What is the turnover limit for startups?<\/strong> <p class=\"schema-faq-answer\">For a business to be considered a startup in India for tax benefits and other incentives, its annual turnover must not exceed INR 100 crore in any of the previous financial years. Additionally, the entity must be incorporated or registered within the last 10 years from the date of incorporation.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1747736190768\"><strong class=\"schema-faq-question\">What are the tax benefits of startups?<\/strong> <p class=\"schema-faq-answer\">According to a spokesperson of DPIIT, the tax benefit allows eligible startups a 100% income tax deduction on profits for any three consecutive years within a ten year window from the date of incorporation.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1747736204182\"><strong class=\"schema-faq-question\">Is startup investment taxable?<\/strong> <p class=\"schema-faq-answer\">In India, angel tax applies to investments raised by startups when the amount received exceeds the company&#8217;s fair market value (FMV). The tax is charged at 30.9% (including surcharge and cess) on the excess investment amount, which is treated as income.<\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>As per the Income Tax Act (Section 80-IAC), a startup is an entity (company or LLP) incorporated between April 2016 [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":2131,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center 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center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income-tax"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\r\n<title>Section 80-IAC: Start-up Tax Benefits Get 5-Year Lifeline - Tax Guide<\/title>\r\n<meta name=\"description\" content=\"Section 80-IAC Tax benefit supports innovative startups with scalable business models, easing financial burdens in early stages.\" \/>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.caclubindia.com\/guide\/section-80iac-start-up-tax-benefits\/\" 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The tax is charged at 30.9% (including surcharge and cess) on the excess investment amount, which is treated as income.","inLanguage":"en-US"},"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/posts\/2128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/comments?post=2128"}],"version-history":[{"count":2,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/posts\/2128\/revisions"}],"predecessor-version":[{"id":2133,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/posts\/2128\/revisions\/2133"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/media\/2131"}],"wp:attachment":[{"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/media?parent=2128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/categories?post=2128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caclubindia.com\/guide\/wp-json\/wp\/v2\/tags?post=2128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}