Section 80-IAC
What Section 80-IAC means, how it works, a worked example, the mistakes we see and the questions founders ask.
DefinitionSection 80-IAC gives a DPIIT-recognised startup a 100% income tax deduction on profits for any three consecutive years out of its first ten, on approval by the inter-ministerial board.
The tax holiday is the most valuable Startup India benefit. A private limited company or LLP incorporated up to 31 March 2030, with turnover under ₹100 crore in the claim year and DPIIT recognition, can apply through the Startup India portal with its pitch deck, financials and a note on innovation. An inter-ministerial board reviews the application and, if satisfied, issues a certificate. The startup then picks any three consecutive years within its first ten to pay zero tax on business profits, though minimum alternate tax may still apply. You meet it once you turn profitable and want to keep that cash for growth. What it means for you: apply before the profitable years, not after, keep the business genuinely innovative on paper and in practice, and choose the three years when profits will be highest.
How Section 80-IAC works
The deduction is open to an eligible startup: a private limited company or LLP incorporated between 1 April 2016 and 31 March 2030 (the Finance Act 2025 extended the window), with turnover not exceeding ₹100 crore in the year the deduction is claimed, holding DPIIT recognition, and certified by the Inter-Ministerial Board as working on innovation, development or improvement of products, processes or services, or a scalable model with high potential for employment or wealth creation. A business formed by splitting up or reconstructing an existing one does not qualify.
The application is made on the Startup India portal after recognition, with the certificate of incorporation, the memorandum or LLP agreement, the latest financial statements and income tax return, a pitch deck or note on the innovation, and a video link if available. The Board meets periodically; its approval rate has risen since 2023 and decisions now typically arrive within a few months. A rejected application can be re-filed with better evidence.
Once certified, the startup chooses any three consecutive tax years out of its first ten from incorporation and claims a 100% deduction on profits from the eligible business in those years, claimed in the return of each year with the audit report the section requires. The deduction cannot be combined with the concessional 22% corporate rate under Section 115BAA, and minimum alternate tax at 15% of book profit (alternate minimum tax for an LLP) still applies, with credit carried forward for 15 years.
A Noida SaaS company incorporated in 2022 and recognised by DPIIT in 2023 applies to the Board in 2025 while still loss-making and receives its certificate in early 2026. It turns profitable in 2027-28 and elects 2027-28, 2028-29 and 2029-30 as its tax holiday, saving around ₹3 crore of tax on a projected ₹12 crore of cumulative profit, while paying minimum alternate tax at 15% of book profit and carrying the credit forward to set off once the holiday ends.
Mistakes we see with Section 80-IAC
- Applying only after turning profitable, when the certificate takes months and the three-year window cannot be back-dated.
- Opting for the 22% rate under Section 115BAA for a quick saving in a small-profit year, which permanently forfeits the 80-IAC deduction.
- Treating DPIIT recognition as the tax holiday itself; recognition is the gateway, and the Board's certificate is the separate approval the deduction needs.
- Choosing the three years as soon as profit appears instead of modelling when profit will peak within the ten-year window.
Last updated 19 October 2026. Checked against the MCA, GST, Income-tax and Trade Marks rules in force for October 2026.
Where you will meet this term
- Start-up India RegistrationFor a Pvt Ltd, LLP or registered partnership under 10 years old that wants DPIIT recognition and a shot at the 80-IAC tax holiday.from ₹4,999
- Income Tax Planning & FilingSalaried people, investors, NRIs, freelancers and business owners who want the return right, not just filed.from ₹999
- CFO ServicesFunded startups and growing companies that need a finance head for a few hours a week: runway, board packs, budgets and fundraise support, without a full-time hire.from ₹24,999/month
Questions founders ask about Section 80-IAC
Is DPIIT recognition enough to claim the 80-IAC deduction?
No. Recognition makes the startup eligible to apply. The deduction requires a separate certificate from the Inter-Ministerial Board, applied for on the Startup India portal, and the usual conditions on incorporation date and ₹100 crore turnover must hold in the years claimed.
Do I still pay any tax during the 80-IAC holiday?
Minimum alternate tax at 15% of book profit (plus surcharge and cess) still applies to a company, and alternate minimum tax to an LLP. The amount paid becomes a credit against normal tax in later years, usable for 15 years, so the cash saving is deferred rather than lost.
Does the Income-tax Act 2025 continue the startup tax holiday?
Yes. The provision continues under a new section number for startups incorporated up to 31 March 2030, and certificates and elections made under the 1961 Act carry forward without a fresh application.