Introduction: Startup Growth with Tax Relief
For a startup in India, every rupee saved is a rupee earned.
And under the Startup India initiative, the government offers one of the most powerful tools to encourage innovation and ease early-stage cash flow pressures a 100% income tax exemption for three consecutive years under Section 80-IAC of the Income Tax Act, 1961.
But while many entrepreneurs know this benefit exists, very few successfully claim it.
This is because the process involves not just DPIIT recognition, but also separate approval from the Central Board of Direct Taxes (CBDT), proper documentation, and clear understanding of legal requirements.
In this in-depth guide, RegistrationMART with 10+ years of experience in startup registration and tax advisory will walk you through:
- What Section 80-IAC is
- Who can claim this exemption
- How to apply for approval
- Document checklist
- Key tax planning tips for startup founders
- Common pitfalls and compliance challenges
Let’s help you legally save lakhs in tax while remaining 100% compliant.
Table of Contents
- What is Section 80-IAC?
- Eligibility Criteria for 80-IAC
- Benefits of Claiming 80-IAC
- Step-by-Step Application Process
- Required Documents
- Important Timelines
- Case Example: How Startups Save Big
- Compliance After Exemption Approval
- Common Rejections & Mistakes
- FAQs
- Why Choose RegistrationMART
What is Section 80-IAC?
Section 80-IAC of the Income Tax Act, 1961 provides 100% tax exemption on profits earned by eligible startups for three consecutive financial years out of ten years from incorporation.
This incentive is offered under the Startup India scheme to ease financial burdens and boost innovation.
✅Key Benefit: Startups pay zero income tax for 3 years, if approved under 80-IAC.
It is not an automatic benefit. It requires:
- DPIIT recognition
- Separate application to CBDT
- Proper documentation and justification of innovation
Eligibility Criteria for Claiming 80-IAC
Only startups that fulfillALL the following conditions are eligible:
| Condition | Description |
| Entity Type | Private Limited Company or LLP |
| Incorporation Date | On or after April 1, 2016 |
| Age of Startup | Not more than 10 years from incorporation |
| Annual Turnover | Should not exceed ₹100 crore in any previous year |
| DPIIT Recognition | Mandatory before applying |
| Innovative Business | Should be working on innovation/improvement/scalable model |
| Approval from CBDT | Must be obtained before claiming exemption |
📌Note: Partnerships and sole proprietorships are not eligible under this section.
Benefits of Section 80-IAC Exemption
Here’s how this exemption helps eligible startups:
1. Income Tax Savings
- 100% exemption on profits (no income tax for 3 years)
- Results in savings of up to ₹60–70 lakh for early-stage startups
2. Improved Cash Flow
- Reduces outflow to tax authorities
- Helps reinvest profits in growth, hiring, and R&D
3. Enhanced Credibility
- 80-IAC approval boosts trust among investors and stakeholders
- Demonstrates innovation and tax compliance
4. Flexible Year Selection
- You can choose any 3 years from the first 10 years of incorporation (not necessarily the first 3)
Step-by-Step Application Process for Section 80-IAC
RegistrationMART follows a structured 5-stage approach:
Step 1: Obtain DPIIT Recognition
Before applying, you must be recognized as a startup by DPIIT under Startup India.
(Don’t have it? Read our detailed guide or contact us we’ll help.)
Step 2: Prepare Key Documents
Gather key financials, pitch deck, innovation proof, and declarations. See checklist below.
Step 3: File Application with CBDT
- Login to the Startup India portal
- Go to: “Apply for Tax Exemption under 80-IAC”
- Fill form with business details, innovation explanation, and upload documents
Step 4: Verification by Inter-Ministerial Board (IMB)
Your application will be reviewed by the Inter-Ministerial Board of Certification.
The board may request clarifications, presentations, or proof of innovation.
Step 5: Approval & Exemption Letter
If approved, you’ll receive a formal CBDT certificate under Section 80-IAC.
This certificate is required while filing income tax returns in exemption years.
Document Checklist for 80-IAC Application
| Document | Purpose |
| Certificate of Incorporation | Proof of company setup |
| PAN Card of Entity | Tax identification |
| Board Resolution | Authorizing 80-IAC application |
| Startup Pitch Deck | Must explain innovation clearly |
| Audited Financial Statements | For last 3 years (if applicable) |
| ITRs Filed | Previous year’s income tax returns |
| Declaration of Originality | Startup is not formed from split/reconstruction |
| Innovation/Technology Details | Describe R&D, USP, problem-solving |
| DPIIT Certificate | Mandatory |
🔍 Tip: Poor documentation is the #1 reason for rejection. Get expert help to ensure completeness.
Important Timelines
| Task | Timeline |
| DPIIT Registration | 5–10 working days |
| 80-IAC Application Filing | 1–2 days |
| IMB Review | 2–4 weeks |
| CBDT Approval | 30–60 days from application (if no issues) |
Case Example: How Startups Save with 80-IAC
Let’s say your startup earned:
- ₹40 lakh profit in Year 4
- ₹70 lakh in Year 5
- ₹90 lakh in Year 6
By choosing Years 4–6 as the 3 exemption years:
- You save approx ₹60+ lakh in taxes
- Funds can instead go to hiring, marketing, or expansion
📌Strategic Tip: Choose 3 most profitable years (not just the first 3 years).
Post-Approval Compliance
Once your exemption is granted, make sure to:
- File ITR on time every year
- Maintain all supporting documents of innovation and usage of funds
- Keep DPIIT & CBDT approval letters safe
- Mention 80-IAC exemption claim in ITR Form
Non-compliance may result in withdrawal of the benefit and demand notice from IT Dept.
Common Mistakes to Avoid
| Mistake | Impact |
| Not having DPIIT certificate | Application will be rejected |
| Missing Board Resolution | Seen as procedural non-compliance |
| Weak Innovation Write-Up | Most common reason for denial |
| Ignoring compliance post-approval | May lead to revocation of exemption |
| Expecting automatic benefit | Must apply separately to CBDT |
FAQs on Section 80-IAC
Q1: Can I apply before generating profits?
🟩 Yes. You must apply before claiming the exemption in any profitable year.
Q2: Can LLPs apply?
🟩 Yes, provided the LLP is recognized by DPIIT.
Q3: Can I apply again if rejected once?
🟨 Yes, but only if material changes are made or missing documents are added.
Q4: Is there a time limit to apply?
🟩 You must apply before the end of the 10th year from incorporation.
Q5: Can I choose non-consecutive 3 years?
🟩 No. Exemption applies to 3 consecutive years only.
Why Choose RegistrationMART?
Over the past 10+ years, we’ve helped 1000+ startups and SMEs navigate legal and tax systems with:
- ✅ DPIIT &Startup India Registration
- ✅ 80-IAC Application Filing
- ✅ Income Tax Filing & Compliance
- ✅ Complete Business Registration Services
- ✅ Post-approval Monitoring & Legal Advisory
Our mission is simple: “Simplify Startup Legalities. Maximize Startup Success.”
Final Thoughts
The 80-IAC exemption is one of the most powerful tax-saving tools for Indian startups.
But to claim it, you need more than just forms you need a legally sound, strategically crafted application that convinces the government that your business is genuinely innovative and growth-oriented.
At RegistrationMART, we don’t just file applications. We help startupsbuild confidence, trust, and compliance, every step of the way.
Let’s unlock your tax savings today so you can reinvest tomorrow.
