Section 80-IAC gives an eligible startup a 100% deduction of profits for any three consecutive years chosen out of its first ten – the closest thing to a genuine tax holiday left in Indian law. Budget 2025 extended the door to startups incorporated before 1 April 2030, and from April 2026 the provision lives on as Section 140 of the new Income-tax Act 2025. But the numbers deserve respect: only about 2% of recognised startups actually hold the certificate. This guide covers eligibility, the IMB process, the MAT trap, and – most importantly – how to time the three years so the holiday lands on real profits.
The mechanics
| Element | Position (2026) |
|---|---|
| Deduction | 100% of profits of the eligible business |
| Period | Any 3 consecutive years, chosen by the startup, out of the 10 years from incorporation |
| Who qualifies | Company or LLP only – partnership firms and cooperatives can hold DPIIT recognition but not the holiday |
| Incorporation window | 1 April 2016 to before 1 April 2030 (Budget 2025 extension) |
| Turnover cap | ₹100 crore in the year of claim – note this did NOT rise with the 2026 DPIIT definition change to ₹200 crore |
| Gate | DPIIT recognition + Inter-Ministerial Board (IMB) certificate on a separate application |
| Anti-abuse | Not formed by splitting/reconstructing an existing business; not more than 20% previously-used plant and machinery |
| From April 2026 | Re-enacted as Section 140, Income-tax Act 2025 – same structure; the old 80-IAC governs periods up to AY 2026-27 |
The IMB – the gate most startups underestimate
- The Board (DPIIT + Department of Biotechnology + Department of Science & Technology) certifies that the business is genuinely innovation-driven;
- The 2025 revised framework promises decisions on complete applications within 120 days, and approval volumes have risen sharply – recent meetings have cleared 70–110 startups each;
- Cumulative certificates still number only in the few thousands against 2.1 lakh recognised startups – the filter is real;
- What works: concrete evidence of technological innovation, market traction, scalability and employment – the same materials as a serious investor deck, framed for policy reviewers. Historic rejections clustered around weak innovation evidence and businesses formed by reconstruction.
The timing decision – where the real money is
- Pair with the startup loss carry-forward relaxation: eligible startups can carry losses through shareholder changes (the usual 51% continuity rule is relaxed) within a 10-year window – vital across funding rounds;
- IMB certification also unlocks ESOP tax deferral for employees – perquisite tax deferred up to ~5 years or until exit/sale;
- Losses already absorbed, depreciation claimed and the ₹100-crore cap all feed the modelling – this is a spreadsheet decision, not a form-filling one.
The MAT/AMT trap
| Entity | Position during the holiday |
|---|---|
| Company | MAT at 15% of book profits still applies – the “100% holiday” year often still pays MAT, creditable over the following 15 years. And 80-IAC cannot be combined with the 22%/15% concessional regimes (115BAA/115BAB) – you choose one path |
| LLP | Outside MAT; model AMT at 18.5% where the deduction is claimed – the LLP route can approach genuine zero tax, one reason funded startups still worth structuring advice |
Applying
- 1. Hold DPIIT recognition;
- 2. File the 80-IAC application on the Startup India portal with financials, pitch materials, innovation evidence and a CA-certified projection set;
- 3. Respond to IMB queries; decision targeted within 120 days;
- 4. With the certificate, claim the deduction in the ITR of each chosen year – audit and reporting requirements apply.
Modelling the three-year window?
We prepare the IMB application and run the holiday-timing model – losses, MAT, the ₹100-crore cap – so the exemption lands where the profits are.
Talk to My Cloud AccountantFrequently asked questions
What is the 80-IAC deduction?
100% of the profits of an eligible startup for any three consecutive assessment years chosen out of the first ten from incorporation – available to DPIIT-recognised companies and LLPs holding an IMB certificate, incorporated before 1 April 2030, with turnover up to ₹100 crore.
Did the 2026 DPIIT changes raise the 80-IAC turnover limit?
No – the February 2026 notification raised the recognition ceiling to ₹200 crore, but the tax provision (now Section 140 of the Income-tax Act 2025) keeps its own ₹100 crore cap, 10-year window and 2030 incorporation deadline.
Do startups pay any tax during the 80-IAC holiday?
Companies usually still pay MAT at 15% of book profits (creditable over 15 years); LLPs sit outside MAT but should model AMT. The holiday eliminates normal tax on eligible profits, not necessarily the entire cash outflow.
What happened to 80-IAC under the new Income-tax Act 2025?
It survives as Section 140, effective from tax year 2026-27, with the same 100%/3-of-10-years structure. Claims for earlier years continue under the old section 80-IAC.
Based on section 80-IAC of the Income-tax Act 1961, Section 140 of the Income-tax Act 2025 (effective 1 April 2026), the Budget 2025 extension and the revised IMB evaluation framework (2025). Last reviewed: July 2026.