For a profitable young company, Section 80-IAC is the most valuable benefit in the Startup India toolkit: three years of zero income tax on business profits. The eligibility window has been widened to 1 April 2030, but the benefit is not automatic — and many startups lose it by missing one step. Here is how it works and how to claim it.
| Quick answer | Key point |
|---|---|
| What is it? | Section 80-IAC gives an eligible startup a 100% income-tax deduction on profits for any 3 consecutive years within its first 10 years. |
| Who qualifies? | A DPIIT-recognised Private Limited Company or LLP, incorporated 1 April 2016 – before 1 April 2030, with turnover below Rs. 100 crore. |
| Extended window | The incorporation deadline was extended to 1 April 2030 (Union Budget 2025-26). |
| How to claim | DPIIT recognition and a separate IMB certificate — both are required. |
| Catch | MAT still applies — companies pay 15% on book profits even during the holiday. |
What is the Section 80-IAC tax holiday?
Section 80-IAC allows an eligible startup to claim a 100% deduction on profits and gains from its eligible business for any 3 consecutive assessment years within the first 10 years from incorporation. Introduced in 2017 under the Startup India initiative, it effectively makes the income tax on those profits nil for the chosen three years.
For a startup earning, say, Rs. 50 lakh of annual profit at a 25% corporate rate, the holiday saves roughly Rs. 12.5 lakh a year — about Rs. 37.5 lakh over the three years.
Who is eligible?
| Criterion | Requirement |
|---|---|
| Entity type | Private Limited Company or LLP (partnership firms are not eligible for 80-IAC) |
| Incorporation date | On or after 1 April 2016 and before 1 April 2030 |
| Age | Less than 10 years old |
| Turnover | Below Rs. 100 crore in any financial year |
| Nature | Working towards innovation, or a scalable model with high potential for employment or wealth creation |
| Recognition | DPIIT-recognised, plus a separate IMB certificate |
The Union Budget 2025-26 extended the incorporation window to 1 April 2030, bringing a wider cohort of startups into eligibility.
The two-step process most startups get wrong
The deduction is not automatic. It takes two distinct approvals:
- DPIIT recognition — apply through the National Single Window System (nsws.gov.in). It is free, and no agent is needed. This is the entry point for every Startup India benefit.
- IMB certificate — after recognition, file a separate application for the Inter-Ministerial Board’s “eligible business” certificate. Only this certificate actually activates the 80-IAC holiday.
Many founders obtain DPIIT recognition, assume the tax holiday is automatic, and never file for the IMB certificate — silently losing the benefit. Both steps are mandatory.
The most powerful lever: choose your 3 years
You can pick which 3 consecutive years within the first 10 to claim the deduction. Early-stage startups are often loss-making at the start, so claiming the holiday in the earliest years can waste it. The smart move is to select the three consecutive years with the highest expected profits — timing the holiday to where it saves the most tax. The three years must be consecutive; you cannot skip a year.
The catch: MAT still applies
The 80-IAC deduction zeroes regular income tax on eligible profits, but Minimum Alternate Tax (MAT) still applies — companies pay 15% on book profits even during the holiday. The MAT paid is not lost: it carries forward as MAT credit for up to 15 years and can be set off against regular tax in later, post-holiday years. Factor this into the cash-flow plan.
Note too that the deduction applies only to eligible business profits — not to interest income, capital gains or other non-business income.
A related relief: angel tax is gone
Separately, the long-criticised “angel tax” under Section 56(2)(viib) was abolished from 1 April 2025, removing tax on the premium at which startups raise funding. Together with the 80-IAC window extension, the startup tax environment is materially friendlier than a couple of years ago.
How the holiday fits the bigger picture
Section 80-IAC sits within the Startup India framework: DPIIT recognition unlocks the ecosystem benefits, the IMB certificate activates the tax holiday, and the founder then times the three-year deduction to peak profits while planning around MAT. With the incorporation window now open to 1 April 2030 and angel tax abolished, the benefit reaches more startups than before — but only those that complete both approval steps capture it. For how the new direct-tax code itself works, see /blog/income-tax-act-2025-explained.
Key takeaways
- Section 80-IAC gives a 100% tax holiday on profits for any 3 consecutive years in the first 10.
- Eligible: DPIIT-recognised Pvt Ltd/LLP, incorporated before 1 April 2030, turnover below Rs. 100 crore.
- You need both DPIIT recognition and a separate IMB certificate — the IMB step is often missed.
- Choose the 3 highest-profit consecutive years; MAT still applies (with 15-year credit).
- Angel tax was abolished from 1 April 2025, easing fundraising.
Frequently asked questions
What is the startup tax holiday under Section 80-IAC? A 100% income-tax deduction on profits from the eligible business for any 3 consecutive assessment years within the first 10 years from incorporation.
Who is eligible for Section 80-IAC? A DPIIT-recognised Private Limited Company or LLP, incorporated on or after 1 April 2016 and before 1 April 2030, with turnover below Rs. 100 crore, working on innovation or a scalable model.
Has the incorporation deadline been extended? Yes. The Union Budget 2025-26 extended the incorporation window for 80-IAC eligibility to 1 April 2030.
How do I claim the 80-IAC holiday? First obtain DPIIT recognition via nsws.gov.in, then file a separate application for the Inter-Ministerial Board (IMB) certificate. Only the IMB certificate activates the deduction.
Can I choose which 3 years to claim? Yes, any 3 consecutive years within the first 10 from incorporation. Choosing the highest-profit years maximises the benefit, but the years must be consecutive.
Does MAT apply during the tax holiday? Yes. Companies pay 15% Minimum Alternate Tax on book profits even during the holiday, though the MAT credit carries forward for up to 15 years.
Startup tax holiday kaise milta hai? Pehle DPIIT recognition (nsws.gov.in) lein, phir alag se IMB certificate ke liye apply karein — IMB certificate hi 80-IAC ki tax holiday ko activate karta hai.
Are partnership firms eligible for 80-IAC? No. Section 80-IAC is available only to Private Limited Companies and LLPs. Partnership firms can get DPIIT recognition but not the 80-IAC holiday.
Want help claiming the startup tax holiday?
Getting DPIIT recognition and the IMB certificate in the right order — and timing the three-year window around your profits and MAT — is where the real value (and the common mistakes) lie. Regikart’s CA & CS team handles the full process. Reach us at +91 70444 94804 or [email protected], or see our startup services at /startup-india-registration.
About the author
CA & CS Team
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