Section 80-IAC Explained: Startup Tax Holiday Guide

Section 80-IAC of the Income-tax Act is the startup tax holiday: eligible startups can claim a 100% deduction on their profits for three years. It is one of the most valuable Startup India benefits, and one of the easiest to lose by missing a step. This guide explains who qualifies, the two approvals you need, and the points to check with an accountant.

Last checked on 21 October 2026 against the Startup India website and a Government of India press release. Tax rules, section numbers and form names change, so confirm everything with the official sources below and a chartered accountant before you claim.

Table of Contents

What Is the Section 80-IAC Tax Holiday?

An eligible startup can deduct 100% of its profits from taxable income for any three consecutive financial years out of its first ten years from the date of incorporation. You choose which three years to claim, which matters because most startups make little or no profit in the early years.

Who Is Eligible?

Based on the official Startup India page and the Ministry of Commerce and Industry’s press release of 15 May 2025:

DPIIT recognition: your business must first be recognised as a startup. See our DPIIT recognition guide.
Entity type: a Private Limited Company or a Limited Liability Partnership (LLP). Partnership firms can get DPIIT recognition but are not eligible for 80-IAC.
Incorporation date: the Startup India page states incorporation on or after 1 April 2016. The government press release says the eligibility window was extended to startups incorporated before 1 April 2030, following the 2025-26 Union Budget. Some older guides still show earlier cut-off dates and are out of date.
Time limit: the three years must fall within the first ten years from incorporation.

Turnover limit

Advisory sites report that turnover must not exceed INR 100 crore in the year you claim. This is stated by tax-advisory sources and not by the Startup India summary page, and one source claims a higher limit from 2026-27. Check the current text of the law before relying on any turnover figure.

Two Approvals, Not One

This is where many startups go wrong. Being DPIIT-recognised does not automatically give you the tax holiday.

DPIIT recognition (Certificate of Recognition), applied for on the National Single Window System.
80-IAC approval from the Inter-Ministerial Board (IMB), which you apply for separately using the income tax exemption application on the Startup India portal after you are recognised.

How to Apply

The Startup India page describes the process like this:

Register on the portal and get DPIIT recognition.
Submit the Section 80-IAC income tax exemption application with the supporting documents.
Track the application status on your dashboard.

Documents listed on the official page

Memorandum of Association or LLP deed
Board resolution, if any
Three years of annual accounts
Three years of income tax returns

A very new company will not have three years of accounts yet, so check the application guide for what to submit in that case.

How long does approval take?

The Government press release says complete applications are now reviewed within 120 days. The Startup India page itself does not give a processing time, so treat 120 days as the official target and not a guarantee.

Claiming the Deduction in Your Tax Return

Approval does not give the deduction by itself. You must still claim it in your income tax return for the year, with the required supporting reports, and file within the due date. Which form, schedule or section number applies depends on the current law, which has been restructured under the new Income-tax Act. Ask your chartered accountant to confirm the current claim procedure, as sources disagree and some details could not be verified.

Watch Out for These Issues

The new tax regime. Advisory sources say that a company that opts for the lower 115BAA tax rate generally cannot claim 80-IAC. Choose your regime with a CA before you file, because a wrong choice can cost you the benefit.
Minimum Alternate Tax (MAT). Some companies may still owe MAT even when regular tax is nil. Ask your CA whether it applies to you.
The ten-year clock. Sources say it runs from incorporation, not from recognition or approval. Do not wait years to apply.
Section numbers. Under the new Income-tax Act the section numbers have changed. Use the current reference when you file.

Common Mistakes

Assuming DPIIT recognition is enough for the tax holiday.
Applying as a partnership firm, which is not eligible for 80-IAC.
Reading an out-of-date guide with the wrong incorporation window.
Choosing a tax regime that excludes the deduction.
Forgetting to claim the deduction in the return even after approval.

Frequently Asked Questions

Is Section 80-IAC automatic once I am DPIIT recognised?

No. It needs a separate application and approval from the Inter-Ministerial Board.

Can a partnership firm claim Section 80-IAC?

No. Only Private Limited Companies and LLPs are eligible, according to the official page.

Which three years can I choose?

Any three consecutive financial years within the first ten years from incorporation.

Until which incorporation date is the benefit available?

The Government press release of 15 May 2025 says startups incorporated before 1 April 2030 are eligible. Confirm the latest position on the official site.

Do I still need a chartered accountant?

Yes. Claiming the deduction involves tax regime choices and filing details that are best confirmed by a professional.

Official Sources

This article is general information, not legal or tax advice. Speak to a chartered accountant before relying on any tax benefit.