Income-tax Act 1961 · s.80-IAC

Section 80-IAC —
100% Tax Holiday for Startups

The 100% profit deduction for DPIIT-recognised start-ups: eligibility, the Inter-Ministerial Board (IMB) approval, the ₹100 crore turnover cap, MAT applicability and the Budget-2025 window up to 31 March 2030.

Updated for FY 2025-26 Verified vs DPIIT & Budget 2025 Startup Tax Guide

Talk to a Startup Tax Expert See eligibility

100%Profit deduction

3 of 10Years you can claim

₹100 crTurnover cap / year

31 Mar 2030Incorporation deadline

Quick Answer

Section 80-IAC gives an eligible DPIIT-recognised start-up a 100% deduction on its business profits for any 3 consecutive years out of the first 10 years from incorporation. To qualify, the entity must be a private limited company or LLP, be incorporated between 1 April 2016 and 31 March 2030 (window extended by Budget 2025), keep annual turnover ≤ ₹100 crore, and hold a certificate from the Inter-Ministerial Board (IMB) — DPIIT recognition alone is not enough. Companies still pay 15% MAT on book profits.

Deduction 100%

Claim window 3 of 10 yrs

Turnover cap ≤ ₹100 cr

Incorporate by 31 Mar 2030

DPIIT recognition ≠ 80-IAC eligibility

A start-up must separately apply to the Inter-Ministerial Board (IMB) for an 80-IAC certificate through the Startup India portal. The IMB assesses whether the business is genuinely innovative and scalable — many DPIIT-recognised start-ups are rejected at the IMB stage. Only after the IMB certificate can you claim the deduction in your ITR.

Who qualifies

Eligibility Conditions for Section 80-IAC

Every 80-IAC condition and what it means in practice. All must be satisfied for the year in which the deduction is claimed.

Condition	Requirement	Notes
Entity type	Private limited company or LLP	Proprietorship / partnership firm not eligible
DPIIT recognition	Recognised as a start-up by DPIIT	Apply at startupindia.gov.in
Incorporation date	Between 1 Apr 2016 and 31 Mar 2030	Extended by Budget 2025 (was 31 Mar 2025)
Annual turnover	Must not exceed ₹100 crore	Checked for each year of the claim
Business nature	Innovation / development of a new product, process or service	IMB evaluates this
IMB approval	Certificate from the Inter-Ministerial Board	Separate from DPIIT recognition
Reconstruction bar	Not formed by splitting up / reconstructing an existing business	Genuine new incorporation required

Also barred: entities formed by transfer of old plant & machinery beyond the 20% limit. New Income-tax Act 2025 (from AY 2026-27) carries the same relief forward under its renumbered start-up clause; the familiar "80-IAC" reference and all conditions above continue.

The wider basket

Start-up Tax Benefits — 80-IAC & Beyond

80-IAC is the headline benefit, but DPIIT-recognised start-ups get a package of concessions. Here is how they stack up.

Benefit	Section	Condition	Maximum benefit
100% profit deduction	80-IAC	DPIIT + IMB; turnover < ₹100 cr; incorporated 2016–2030	Zero tax for 3 of 10 years
Angel-tax exemption	56(2)(viib)	DPIIT recognition (angel tax abolished for all from AY 2025-26)	Investments above FMV not taxed
Loss carry-forward relaxation	79	Eligible start-up; original shareholders of loss year continue	Carry losses despite >51% shareholding change
ESOP tax deferral	192(1C)	DPIIT start-up; resident employee	TDS deferred up to 5 yrs / exit / sale
Capital-gains reinvestment	54GB	Individual sells residential house, invests in eligible start-up	Gain exempt to the extent invested

Angel tax under Section 56(2)(viib) was abolished for all investor classes from AY 2025-26 (Finance (No.2) Act 2024), removing an earlier start-up pain point.

The fine print

MAT Still Applies to Companies

Section 80-IAC reduces taxable income under the regular provisions to nil — but a company still pays Minimum Alternate Tax (MAT) at 15% of book profits (plus surcharge and cess) under Section 115JB. So the "tax holiday" is a MAT-level holiday for companies, not a zero-outflow one.

MAT credit for the tax paid can be carried forward and set off for up to 15 years.
LLPs are outside MAT — they pay Alternate Minimum Tax (AMT) at 18.5%, but AMT does not apply where the only deduction is 80-IAC-type Chapter VI-A "Part C" profit-linked relief only if AMT conditions are met — confirm your AMT position.
Choosing the 3 highest-profit years inside the 10-year window maximises the benefit; loss years can be skipped.

Pick your 3 years wisely

The deduction is 100% of profits, so it is worth most in your peak-profit years. Early-stage losses can be carried forward separately (8 years for business loss, indefinitely for unabsorbed depreciation), letting you defer the 80-IAC claim to profitable years still within the first 10 from incorporation.

Not sure which years to claim, or whether the IMB will approve you?

Talk to a Startup Tax Expert →

Step by step

How to Apply for the 80-IAC Certificate

DPIIT recognitionRegister the start-up at startupindia.gov.in

→

80-IAC applicationFill the tax-exemption form on the portal

→

IMB reviewBoard checks innovation & scalability (~45–90 days)

→

Claim in ITRFile ITR-6 / ITR-5 with the IMB certificate

You will typically upload the certificate of incorporation, audited financials and a brief on the innovative business model / technology. The IMB comprises DPIIT, CBDT and other ministry representatives; on approval it issues the 80-IAC certificate, which you attach when claiming the deduction.

80-IAC likely fits if

You are a DPIIT-recognised Pvt Ltd / LLP
Incorporated on or after 1 Apr 2016
Turnover under ₹100 crore
A genuinely innovative, scalable product or process
Expecting profitable years within the first 10

Reconsider if

You are a proprietorship or a general partnership firm
Formed by splitting / reconstructing an old business
Turnover has crossed ₹100 crore
Business is a routine trading / services shop with no innovation
You are already past 10 years from incorporation

Government sourcesProvision: incometax.gov.in — Income-tax Act 1961, s.80-IAC · Recognition & IMB: startupindia.gov.in · Window extension to 31 Mar 2030: Finance Bill 2025 (eff. 1 Apr 2025) · Angel-tax abolition: Finance (No.2) Act 2024 (from AY 2025-26)

Section 80-IAC — Frequently Asked Questions

Basics

What is Section 80-IAC of the Income-tax Act?

Section 80-IAC gives an eligible DPIIT-recognised start-up a 100% deduction on the profits of its eligible business for any 3 consecutive assessment years out of the first 10 years from the date of incorporation. In effect it means zero regular income tax on those profits for the chosen 3-year window, though companies still pay 15% MAT on book profits.

How much is the 80-IAC deduction?

The deduction is 100% of the profits and gains derived from the eligible business. There is no rupee cap on the deduction itself — the cap is on turnover (₹100 crore a year). So a profitable eligible start-up can bring its regular taxable business income to nil for 3 years.

Who is eligible for Section 80-IAC?

A private limited company or an LLP that (a) is recognised as a start-up by DPIIT, (b) was incorporated between 1 April 2016 and 31 March 2030, (c) has annual turnover not exceeding ₹100 crore, (d) works on innovation / development of a product, process or service, and (e) holds a certificate from the Inter-Ministerial Board (IMB). It must not be formed by splitting up or reconstructing an existing business.

Eligibility

Did Budget 2025 change 80-IAC?

Yes. The Finance Bill 2025 extended the incorporation window for 80-IAC eligibility from 31 March 2025 to 31 March 2030, effective 1 April 2025. Start-ups incorporated up to 31 March 2030 can now qualify for the 3-year, 100% profit deduction. Other conditions — DPIIT recognition, IMB certificate and the ₹100 crore turnover cap — remain unchanged.

Is DPIIT recognition enough to claim 80-IAC?

No. DPIIT recognition is a prerequisite but not sufficient. You must separately obtain a certificate from the Inter-Ministerial Board (IMB) through the Startup India portal. The IMB assesses whether the business is genuinely innovative and has scalable employment / wealth-creation potential. Many DPIIT-recognised start-ups are rejected at the IMB stage, so only the IMB certificate unlocks the 80-IAC deduction.

Are proprietorships or partnership firms eligible for 80-IAC?

No. Only a private limited company or a Limited Liability Partnership (LLP) can claim Section 80-IAC. Sole proprietorships and ordinary partnership firms are not eligible, even if DPIIT-recognised. If you plan to claim 80-IAC, incorporate as a Pvt Ltd company or an LLP.

Is there a turnover limit to continue claiming 80-IAC?

Yes. The start-up's turnover must not exceed ₹100 crore in the financial year for which the deduction is claimed. It is checked year by year — if turnover crosses ₹100 crore in a given year, 80-IAC cannot be claimed for that year. DPIIT recognition itself does not lapse on crossing ₹100 crore, but the 80-IAC benefit for that year does.

Claim window

Can a start-up choose which 3 years to claim 80-IAC?

Yes. The start-up can claim the 100% deduction for any 3 consecutive years within the first 10 years from incorporation (the window was extended from 7 to 10 years in Budget 2023). Because the deduction is worth most in high-profit years, many start-ups defer the claim past their loss-making early years to a profitable 3-year block still inside the 10-year limit.

Do the 3 years have to be consecutive?

Yes. Section 80-IAC requires 3 consecutive assessment years. You cannot pick, say, year 1, year 4 and year 7. You can, however, choose when that consecutive block starts, as long as all three years fall within the first 10 years from incorporation and the eligibility conditions are met in each.

MAT & losses

Does a startup still pay MAT even with the 80-IAC deduction?

Yes, for companies. Section 80-IAC reduces regular taxable income to nil, but Minimum Alternate Tax (MAT) under Section 115JB still applies at 15% of book profits (plus surcharge and cess). The MAT paid becomes MAT credit that can be carried forward for up to 15 years and set off against regular tax in later years. LLPs are outside MAT (they fall under AMT rules instead).

Can a startup carry forward losses if it claims 80-IAC?

Yes. Claiming 80-IAC in profitable years does not stop you carrying forward business losses and unabsorbed depreciation from other years under the normal rules — business loss for 8 years, unabsorbed depreciation indefinitely. DPIIT-recognised eligible start-ups also get a relaxation under Section 79 that lets them carry forward losses even if more than 51% of shareholding changes, provided the original loss-year shareholders continue to hold their shares.

Related benefits

Is angel tax still applicable to DPIIT-recognised startups?

No. Angel tax under Section 56(2)(viib) was abolished for all classes of investors from Assessment Year 2025-26 (Finance (No.2) Act 2024). Previously it taxed share premium received above fair market value as "income from other sources," and DPIIT start-ups had a specific exemption. With the section removed, the issue no longer arises for any company.

What is the difference between Section 80-IB and 80-IAC?

Section 80-IB was an older, broad tax-holiday provision for industrial undertakings, hotels, hospitals and similar businesses, largely phased out now. Section 80-IAC is the current, start-up-specific provision: a flat 100% deduction for DPIIT-recognised, IMB-certified eligible start-ups. For a new start-up today, only 80-IAC is relevant.

How to apply

How do I apply for the 80-IAC certificate?

First get DPIIT recognition at startupindia.gov.in. Then, on the same portal, file the 80-IAC tax-exemption application with details of your innovative business model, technology use and scalability, and upload the incorporation certificate and audited financials. The Inter-Ministerial Board reviews it (typically 45–90 days) and, on approval, issues the 80-IAC certificate, which you attach when claiming the deduction in your income-tax return.

Which ITR form is used to claim 80-IAC?

A company claims 80-IAC in Form ITR-6 and an LLP in Form ITR-5, reporting the deduction under Chapter VI-A and retaining the IMB certificate as support. The return must be filed by the due date — a belated return can disqualify certain deductions, so file on time and keep the IMB approval and audit report ready.

Done-for-you

Related TaxClue Services

Startup India RegistrationGet DPIIT recognition — the first step before 80-IAC.Explore →Private Limited CompanyIncorporate the Pvt Ltd entity that 80-IAC needs.Explore →Income Tax Return FilingFile ITR-6 / ITR-5 and claim the 80-IAC deduction correctly.Explore →80C DeductionsExplore other deductions to plan your overall tax.Explore →

Next in this income-tax cluster

Startup India Registration Private Limited Company Registration Income Tax Slabs FY 2025-26 80C Deductions Income Tax Calculator Income Tax Return Filing

TaxClue for founders

Claiming Section 80-IAC for Your Startup?

From DPIIT recognition and the IMB application to picking the right 3 years and filing your ITR, TaxClue's CA-led team handles the full 80-IAC journey — 100% online, across India.

Check 80-IAC Eligibility → Register Your Startup

Claiming 80-IAC?Talk to TaxClue →

WhatsApp Expert Get Startup Help