- Startup India Tax Benefits 2025 – Income Tax Exemption under Section 80-IAC Explained Simply
Table of Contents
What is the Startup India Tax Exemption?
Startup India is a flagship scheme by the Government of India to support young entrepreneurs, boost innovation, and promote job creation.
One of its major benefits is a 100% income tax exemption for 3 years under Section 80-IAC of the Income Tax Act, 1961.
If your startup qualifies, you can save lakhs of rupees in taxes in your initial years – allowing you to reinvest in your team, technology, and growth.
Key Income Tax Sections for Startups
| Benefit | Income Tax Section | What You Get |
|---|---|---|
| 3-Year Income Tax Holiday | Section 80-IAC | 100% tax exemption for any 3 years out of first 10 years of incorporation |
| Angel Tax Exemption | Section 56(2)(viib) | No tax on investor funding if DPIIT recognized |
| Carry Forward of Business Losses | Section 79 | Allowed even if shareholding drops below 51%, subject to conditions |
| Capital Gain Exemption | Section 54GB | Save tax on capital gains if invested in eligible startup |
Who is Eligible for Tax Exemption under Section 80-IAC?
To claim the exemption, your startup must meet all the following conditions:
- Incorporated on or after 1st April 2016
- Registered as a Private Limited Company or LLP
- Must be DPIIT Recognized
- Annual turnover should not exceed ₹100 crore
- Should be working on innovation or improvement in products, services, or processes
- Should not be formed by splitting or reconstructing an existing business
What is Section 80-IAC?
Section 80-IAC of the Income Tax Act, 1961 provides a 100% income tax exemption for any 3 years out of the first 10 years of startup incorporation.
It is aimed at helping early-stage startups grow without the burden of paying high income tax in the initial years.
If your business is solving a real problem with a fresh idea, you can apply and legally save tax.
How to Apply for Tax Exemption under Section 80-IAC?
Step-by-step process in simple language:
- Go to the Startup India Portal
- Register and apply for DPIIT Recognition (submit documents)
- Once DPIIT certificate is approved, apply for Income Tax Exemption under Section 80-IAC
- Submit the following documents:
- Certificate of Incorporation
- Business pitch deck or product details
- Company’s ITR and financial statements
- Innovation-related information
- Log in to Income Tax Portal and file Form 10-IAC
Real-Life Example
Priya, a young founder from Pune, started an EdTech company in 2021.
She received DPIIT approval in 2023. Her startup had a ₹70 lakh turnover in FY 2024.
She applied under Section 80-IAC, and now she will pay zero income tax for FY 2024-25, 2025-26, and 2026-27.
That’s a tax saving of over ₹15 lakhs in just 3 years.
Important Points to Remember
- You can choose any 3 years (not necessarily the first 3) out of 10 years from incorporation
- You must file Form 10-IAC with the Income Tax Department to claim this benefit
- Even during the tax-exempt years, you must still file your ITR every year
- DPIIT recognition is mandatory to claim any startup tax exemption
Call to Action
Want to register your startup under DPIIT or apply for the Section 80-IAC tax exemption?
Visit TaxGiveIndia.com – We’ll help you with:
- DPIIT Recognition
- Preparing your documents
- Filing Form 10-IAC
- Saving tax the legal and smart way