80- IAC Start-Up India ! Tax Exemption For 3 Out of 10 Consecutive Years

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80- IAC Start-Up India ! Tax Exemption For 3 Out of 10 Consecutive Years

Introduction

Starting and running a business comes with numerous financial challenges, especially in the early years. To support startups and foster innovation, the Indian government introduced Section 80-IAC under the Income Tax Act, offering tax exemptions to eligible startups. This provision helps new businesses sustain and grow by reducing their tax burden. In this blog, we will explore the benefits, eligibility criteria, compliance requirements, and recent amendments under Section 80-IAC.

What is Section 80-IAC?

Section 80-IAC provides tax incentives for DPIIT-recognized startups engaged in the development, deployment, or commercialization of innovative products, processes, or services. It allows startups to claim a 100% tax exemption on profits for a specified period, giving them a significant financial advantage.

Key Features of Section 80-IAC

1. Eligible Businesses

Section 80-IAC applies to startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT). The business must be involved in sectors such as technology, manufacturing, or services and should demonstrate potential for employment generation and wealth creation.

2. Tax Exemption Period

Eligible startups can claim a tax exemption for three consecutive assessment years within the first ten years from their incorporation.

3. Extent of Exemption

Startups are eligible for a 100% exemption on profits and gains derived from their business during the selected assessment years. This reduces their taxable income, leading to lower tax liability and more funds available for business expansion.

4. Time Limit for Availing Exemption

The exemption is available for three assessment years within the first ten years of incorporation. However, the startup must meet the eligibility criteria for each of the chosen years.

5. Compliance Requirements

To avail of this exemption, startups must:

  • Obtain DPIIT recognition.

  • Submit necessary documents and certifications.

  • Ensure compliance with the prescribed conditions.

Inter-Ministerial Board (IMB) Certification

To claim the exemption under Section 80-IAC, startups must obtain certification from the Inter-Ministerial Board (IMB) set up by the Department of Industrial Policy and Promotion (DIPP). The board comprises:

  • Joint Secretary, DPIIT (Convener)

  • Representative of the Department of Biotechnology (Member)

  • Representative of the Department of Science & Technology (Member)

A DPIIT-recognized startup can apply to the IMB for a full deduction on profits and gains, provided the following conditions are met:

  • The entity is a Private Limited Company or LLP.

  • It is incorporated on or after April 1, 2016.

Eligibility Criteria for 80-IAC Tax Exemption

Not all DPIIT-recognized startups qualify for this exemption. To be eligible, the startup must:

  1. Possess a valid DPIIT certificate.

  2. Be structured as a Private Limited Company or LLP.

  3. Have been incorporated on or after April 1, 2016.

  4. Select any three consecutive years within the first ten years of incorporation for claiming the deduction.

  5. Be an original entity and not formed by splitting or reconstructing an existing business.

Required Documents & Information

Startups seeking exemption under Section 80-IAC must submit the following:

  • Company Presentation

  • Financial Reports

  • Fund Utilization Report

  • Application form submission

Application Timeline

The application for 80-IAC must be filed before March 15, 2025. It is then reviewed and sent for Board approval by September 2025. If approved, registration is granted by December 2025.

Finance Bill 2025 - Extension of Benefits

The Finance Bill 2025 proposes an extension of the Section 80-IAC benefits. Previously, startups incorporated between April 1, 2016, and March 31, 2025, with a turnover of up to Rs. 100 crore, were eligible for the exemption. The new amendment extends this benefit for five additional years, making startups incorporated before April 1, 2030, eligible for the deduction.

Conclusion

Section 80-IAC is a crucial tax relief for startups, helping them reinvest profits into business growth and innovation. With the proposed extension in the Finance Bill 2025, even more startups can leverage this exemption to scale their operations efficiently. If you're a startup founder, make sure you meet the eligibility criteria and apply in time to take advantage of this beneficial provision.

Need Assistance?

If you need guidance on Section 80-IAC application and compliance, our team at Eaztaxbiz is here to help. Reach out to us today!

Team Eaztaxbiz

Write us : ca@eaztaxbiz.com

Reach us : +91-9921010284

www.eaztaxbiz.com


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