Section 80-IAC Tax Exemption for Startups (Now Section 140)
An eligible startup can claim a deduction of 100% of its business profits for any three consecutive years out of its first ten. The benefit was section 80-IAC of the 1961 Act and is section 140 of the Income-tax Act, 2025 from tax year 2026-27. You need DPIIT recognition and a separate certificate from the Inter-Ministerial Board; we handle both.
What it is
The section 80-IAC tax exemption, now section 140, lets an eligible startup pay no income tax on the profits of its eligible business for three consecutive years. You choose which three, as long as they fall within ten years from incorporation. Most startups make losses early, so picking the years matters most.
Getting it is a two-step process. First, the company or LLP gets recognised as a startup by DPIIT; our Startup India registration page covers that step. Second, it applies on the Startup India portal for a certificate of eligible business from the Inter-Ministerial Board of Certification (IMB). The deduction depends on the IMB certificate. DPIIT recognition alone is not enough.
Who it applies to
Companies and LLPs
Only a private limited company or an LLP can claim it. Partnership firms and proprietorships do not qualify, even with DPIIT recognition.
Incorporated between 2016 and 2030
The entity must be incorporated on or after 1 April 2016 and before 1 April 2030.
Innovative or scalable businesses
The business must involve innovation, development or improvement of products, processes or services, or a scalable model with high potential for employment or wealth creation.
Why it matters
Pay no tax on three years’ profits
The deduction is 100% of the profits from the eligible business. For the three years you pick, normal income tax on those profits falls away.
Time the holiday yourself
Because you choose the three consecutive years within ten, you can save the holiday for the years when the business is actually profitable.
Show investors a settled tax position
With recognition and an IMB certificate in hand, your section 80-IAC tax exemption position is settled before due diligence begins.
Documents required
Entity documents
- Certificate of incorporation
- MoA and AoA, or LLP agreement
- PAN of the entity
- DPIIT recognition certificate
Financial records
- Audited financial statements for the years completed
- Income tax returns filed so far
- Turnover figures for each year since incorporation
About the innovation
- Description of the product, process or service and what is new about it
- How the business scales or creates jobs
- Patents, trademarks or awards, if any
- Pitch deck or website
How it works
Test eligibility before you apply
We confirm entity type, incorporation date and turnover, and check that the business was not formed by splitting up or reconstructing an existing business, or by moving used plant and machinery into it.
Get DPIIT recognition
If you are not recognised yet, we apply on the National Single Window System. Under the February 2026 notification, recognition covers entities up to ten years old with turnover up to ₹200 crore.
Prepare the IMB application
We write the innovation note in plain language, attach the financials and documents, and file the section 80-IAC tax exemption application from your Startup India dashboard.
Answer the Board’s queries
The IMB may ask for clarifications or more evidence. We answer them and track the application until the certificate is issued.
Claim the deduction in your return
In the year you start the holiday, we claim it in the company’s or LLP’s income tax return, filed by the due date, and plan the next two years.
Section 80-IAC vs section 140
| Section 80-IAC (1961 Act) | Section 140 (2025 Act) | |
|---|---|---|
| Applies to | Up to FY 2025-26 | Tax year 2026-27 onwards |
| Deduction | 100% of eligible profits, 3 consecutive years out of 10 | Same |
| Incorporation window | 1 April 2016 to 31 March 2030 | Same |
| Turnover limit | ₹100 crore | ₹300 crore, after the Finance Act, 2026 |
| Certificate | IMB certificate of eligible business | Same |
The rules carried over almost word for word. The big change is the turnover ceiling. The Finance Act, 2026 raised it from ₹100 crore to ₹300 crore, so a startup that outgrew the old limit may be back in range from tax year 2026-27. In practice, a startup that crossed ₹100 crore should re-check its position now.
Here is the catch: a company claiming the deduction may still pay minimum alternate tax on its book profit. We factor this in before you pick your three years.
Timelines
Incorporate before 1 April 2030
Entities incorporated on or after 1 April 2030 cannot claim the deduction under the current law.
Use it within ten years
The three consecutive years must fall within ten years starting from the year of incorporation.
File the return on time
For FY 2025-26, tax-audit cases must file by 21 November 2026 after the CBDT extension. Profit-linked deductions like this one are lost if the return is filed late.
What happens if you get it wrong
No certificate, no deduction
Claiming the deduction with only DPIIT recognition and no IMB certificate leads to the claim being disallowed, with tax, interest and possible penalty.
Late return loses the holiday
Under section 80AC of the 1961 Act, deductions of this kind are not allowed if the return is not filed by the due date.
Turnover crosses the limit
In a year when turnover exceeds the limit, the deduction is not available for that year, even if the holiday has started.
Frequently asked questions
Is section 80-IAC still available after the new Income-tax Act?
Yes, as section 140 of the Income-tax Act, 2025, which applies from tax year 2026-27. It keeps the 100% deduction for three consecutive years out of ten and the incorporation window of 1 April 2016 to 31 March 2030. For FY 2025-26 and earlier, claims stay under section 80-IAC of the 1961 Act. Both versions require the IMB certificate, so that step never goes away.
Is DPIIT recognition enough to claim the tax exemption?
No. DPIIT recognition is the first step, but the deduction needs a separate certificate of eligible business from the Inter-Ministerial Board of Certification. You apply for it from the Startup India portal after recognition. Recognition alone does not earn the tax benefit. We prepare both applications and follow them through.
What is the turnover limit for the 80-IAC deduction?
Under section 80-IAC, turnover must not exceed ₹100 crore in the year for which the deduction is claimed. Under section 140 of the Income-tax Act, 2025, the Finance Act, 2026 raised this to ₹300 crore. DPIIT recognition has its own limit of ₹200 crore, or ₹300 crore for deep-tech startups. We check each limit year by year so the claim holds.
Can an LLP claim the startup tax holiday?
Yes. Both a company and an LLP can be an eligible startup, provided the LLP was incorporated on or after 1 April 2016 and before 1 April 2030, holds DPIIT recognition and gets the IMB certificate. A partnership firm cannot claim it, even if DPIIT has recognised it as a startup. If you are still choosing a structure, we compare the options with you.
Which three years should we choose?
Pick the three consecutive years in which you expect the highest profits, within ten years from incorporation. Claiming it in a loss year wastes one of the three years. The years must be consecutive, so once you start, the next two follow automatically. Take a Faridabad software startup incorporated in 2021 that expects its first real profit in tax year 2027-28. Starting there covers that year and the next two, all inside the window. We project profits with you before the first claim.
Does the company still pay MAT during the tax holiday?
It can. Minimum alternate tax is calculated on a company’s book profit, and the section 80-IAC or section 140 deduction does not remove that book profit. So a company may pay MAT even in its holiday years, and an LLP may face the similar alternate minimum tax. We work this into the plan before the first claim.
Is angel tax still a concern for startups?
No. Section 56(2)(viib), the so-called angel tax on share premium, was omitted by the Finance (No. 2) Act, 2024 with effect from AY 2025-26, and the Income-tax Act, 2025 has no equivalent. A share valuation is still needed for FEMA and company-law purposes when you raise funds. Where a valuation is needed, a registered valuer or practising CA signs it, and we coordinate it with your fundraise.
Is there a government fee for the IMB certificate?
There is no government fee for DPIIT recognition. The IMB application is filed from the same Startup India dashboard, and we confirm the fee position there, if any, before filing. Your costs are mainly professional, for preparing the innovation write-up and the supporting financials. We quote our fee upfront, before any work starts, so you know the full cost from day one.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
DPIIT recognition carries no government fee.
Ready to begin?
Tell us your incorporation date, turnover and what your product does, and we will tell you whether the tax holiday is within reach.