Introduction: Startup Growth with Tax Relief
For a startup in India, every rupee saved is a rupee earned.
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.
However, while many entrepreneurs know this benefit exists, very few successfully claim it. The process involves not just DPIIT recognition, but also approval from the CBDT, proper documentation, and clear understanding of legal requirements.
RegistrationMART, with over 10 years of experience in startup registration and tax advisory, explains:
- What Section 80-IAC is
- Who can claim this exemption
- How to apply for approval
- Document checklist
- Key tax planning tips
- Common compliance challenges
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
1. 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.
Note: It is not an automatic benefit — DPIIT recognition and CBDT approval are mandatory.
2. Eligibility Criteria for Claiming 80-IAC
| 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 |
| DPIIT Recognition | Mandatory before applying |
| Innovative Business | Must have scalable and innovative model |
| CBDT Approval | Required before claiming exemption |
Note: Sole proprietorships and traditional partnerships are not eligible.
3. Benefits of Section 80-IAC Exemption
- 💰 Income Tax Savings: 100% exemption on profits — potential savings of ₹60–70 lakh.
- 📈 Improved Cash Flow: Funds can be reinvested in hiring, R&D, or marketing.
- 🏅 Enhanced Credibility: Boosts investor trust and brand reputation.
- 🔄 Flexible Year Selection: Choose any 3 years out of 10 years from incorporation.
4. Step-by-Step Application Process
RegistrationMART follows a 5-step streamlined approach:
Step 1: Obtain DPIIT Recognition
Apply on the Startup India portal for DPIIT recognition.
Step 2: Prepare Key Documents
Gather company, financial, and innovation documents (see checklist below).
Step 3: File Application with CBDT
Login to Startup India → “Apply for Tax Exemption under 80-IAC” → Fill details and upload proofs.
Step 4: IMB Verification
The Inter-Ministerial Board reviews your application and may request clarifications.
Step 5: Approval & Certificate
If approved, you’ll receive the official CBDT certificate — essential for claiming exemption in ITR.
5. Document Checklist
| Document | Purpose |
|---|---|
| Certificate of Incorporation | Proof of company setup |
| PAN Card | Tax identification |
| Board Resolution | Authorizing application |
| Startup Pitch Deck | Explains innovation |
| Audited Financial Statements | Last 3 years (if applicable) |
| ITRs Filed | Proof of compliance |
| DPIIT Certificate | Mandatory for eligibility |
6. Important Timelines
| Task | Duration |
|---|---|
| DPIIT Registration | 5–10 working days |
| 80-IAC Application | 1–2 days |
| IMB Review | 2–4 weeks |
| CBDT Approval | 30–60 days (average) |
7. Case Example: How Startups Save Big
Example: Profit of ₹40L, ₹70L, and ₹90L in Years 4–6.
Choosing Years 4–6 saves over ₹60 lakh in tax — funds that can fuel business growth.
Tip: Choose your 3 most profitable years within the 10-year window.
8. Post-Approval Compliance
- File ITR annually and on time
- Maintain innovation and fund usage records
- Keep DPIIT and CBDT certificates safe
- Mention exemption in ITR forms
9. Common Mistakes to Avoid
| Mistake | Impact |
|---|---|
| No DPIIT recognition | Immediate rejection |
| Missing board resolution | Procedural non-compliance |
| Weak innovation write-up | Most common rejection reason |
| Post-approval negligence | Leads to revocation |
| Assuming automatic approval | Application mandatory |
10. FAQs
Q1: Can I apply before earning profits?
🟩 Yes, but approval must be obtained before claiming exemption.
Q2: Can LLPs apply?
🟩 Yes, if recognized by DPIIT.
Q3: Can I reapply if rejected?
🟨 Yes, with updated or corrected documentation.
Q4: Can I choose non-consecutive years?
🟥 No, 3 consecutive years only.
11. Why Choose RegistrationMART?
With over 10 years of experience and 1000+ successful registrations, we specialize in:
- DPIIT & Startup India Registration
- 80-IAC Tax Exemption Filing
- Income Tax and Compliance Support
- Business Incorporation and Advisory
- Affordable Legal Packages
Our mission: “Simplify Startup Legalities. Maximize Startup Success.”
Final Thoughts
The Section 80-IAC exemption is a golden opportunity for startups to save lakhs in taxes — but only if applied strategically and correctly.
At RegistrationMART, we help you go beyond compliance — building legal credibility, investor confidence, and long-term tax efficiency.
Let’s unlock your tax savings today, so you can reinvest for tomorrow.
