Section 80-IAC: the Startup Tax Holiday — Who Actually Gets It, and How the IMB Decides

Here is the misunderstanding I correct most often in this area, and it is an expensive one. A founder gets the DPIIT recognition certificate, files it carefully, and assumes the tax holiday came with it. It did not. Recognition and the Section 80-IAC holiday are two separate approvals, decided by two different processes. Recognition says the government accepts that you are a startup. The holiday — 100% of your eligible profits free of tax for three years — is granted only by the Inter-Ministerial Board, on a separate application, after a much harder look at your business.

So this post does one job. It tells you who actually gets Section 80-IAC, what the Board examines before it says yes, and how the claim is finally made in your tax return. If you are still at the recognition stage, start with our guide to DPIIT recognition: eligibility and process and come back here once the certificate is in hand.

What the holiday actually gives you

Section 80-IAC of the Income-tax Act, 1961 allows an eligible startup a deduction of 100% of the profits and gains from its eligible business. Not a lower rate. Not a partial shelter. The full profit of that business, deducted.

Three limits shape the benefit, and each one matters:

Three consecutive years only. You claim the deduction for any three consecutive assessment years, chosen by you, out of the ten years beginning with the year of incorporation. The choice is yours, which is the whole design — the holiday is worth nothing in loss-making years and a great deal in profitable ones.

Eligible-business profits only. The deduction covers profits from the business the Board certified. Interest on deposits, rent, dividends and other side income are not profits of that business and stay taxable, and the deduction can never exceed the eligible business's profits.

No second deduction on the same profits. Because sub-sections (5) and (7) to (11) of Section 80-IA apply here, profits that have taken the 80-IAC deduction cannot take another deduction under the same part of Chapter VI-A, and the Assessing Officer can recompute profits where goods or services move between your eligible business and another business of yours, or a closely connected party, at prices that do not match market value.

Who actually gets it: the six tests

Every test below must be passed. Five out of six gets you nothing.

Test	What the law asks
Entity	A company or a limited liability partnership. Nothing else.
Vintage	Incorporated on or after 1 April 2016 and before 1 April 2030. The Finance Act, 2025 pushed the closing date out by five years, from 1 April 2025.
Turnover	Turnover in the year relevant to the year you are claiming for must stay within the ceiling for that claim: ₹100 crore for a claim under Section 80-IAC for a period governed by the 1961 Act, ₹300 crore for a claim under Section 140 of the 2025 Act from tax year 2026-27. That is a claim-year test. Do not confuse it with the wording on the portal form as it currently stands, which asks you to acknowledge that turnover has not exceeded ₹100 crore in any financial year since incorporation — that acknowledgement belongs to the application stage, and it is not the test the section applies to your claim year.
Business	An eligible business: innovation, development or improvement of products, processes or services, or a scalable business model with high potential for employment generation or wealth creation.
Clean birth	Not formed by splitting up or reconstructing a business already in existence — the revival exception under Section 33B aside — and not formed by transferring in previously used plant or machinery. Used plant is tolerated only up to 20% of the total value of plant and machinery in the business, with a separate exception for machinery used only outside India and then imported.
Two certificates	DPIIT recognition, and a certificate of eligible business from the Inter-Ministerial Board of Certification. The second one is the gate most applicants underestimate.

One entity point deserves emphasis, because it shuts the door on a real category of recognised startups. A registered partnership firm can hold DPIIT recognition. It cannot claim 80-IAC. The section's own definition of an eligible start-up stops at a company or an LLP, whatever the recognition certificate says.

The trap: "startup" means two different things

This is where careful founders still go wrong, so read this part twice.

The word "startup" carries one definition in the DPIIT notification and a narrower one inside Section 80-IAC itself, and the Income Tax Department publishes the two side by side precisely because they differ. Under the current DPIIT position, recognition runs up to ten years of age and turnover of ₹200 crore, with a longer, higher track for deep-tech startups. Section 80-IAC keeps its own, older lines: a company or LLP, the incorporation window above, and a turnover ceiling measured only in the year relevant to the claim year — ₹100 crore for periods governed by the 1961 Act, and ₹300 crore under Section 140 of the 2025 Act for claims from tax year 2026-27. The years each test looks at differ too. DPIIT recognition looks at every year since incorporation: cross its limit in any one of them and that test fails. The holiday asks only about the year your claim relates to.

The practical consequence is plain. A company can be properly recognised, properly called a startup everywhere else in the system, and still be outside the holiday — because turnover in the year relevant to its claim crossed the ceiling that governs that claim, ₹100 crore for a 1961-Act period or ₹300 crore for a claim from tax year 2026-27, because it is a partnership firm, or because it was incorporated outside the window. Test your facts against the section, not against the recognition certificate. And once you hold recognition, the funding routes open up separately — the Startup India Seed Fund guide covers that side; none of those schemes is decided by the test in this post.

How the Inter-Ministerial Board decides

The Board is set up by DPIIT to validate startups for tax benefits, and it works like an examiner, not a registry. Recognition is largely self-certified. The 80-IAC application is scored. The portal form itself shows you the scorecard, and it is worth studying before you write a single word of the application, because it tells you exactly what evidence the Board weighs:

Your numbers. Annual accounts for the years since incorporation, with revenue and profit or loss for each year. Growth is tested, not asserted: the form carries a chartered accountant's declaration of scalability keyed to revenue growth of more than 10% from one year to the next, or 25% over two years, or over 33% over three years.

Your clean birth, certified. A chartered accountant certifies that the startup was not formed by splitting up or reconstructing an existing business, and not by transferring in previously used plant or machinery. This is a statutory condition being evidenced, not a formality.

Proof of newness. Intellectual property sits at the head of the broad parameters: patents, copyrights and designs, filed or granted, with journal publications where they exist. Awards at district, state and national level, the stage your product or service has reached, and research personnel — M.Tech and PhD holders, and their publications — all feed the same question: is this genuinely new, or an old business in new clothes?

Proof of traction. External funding obtained, with term sheets, investment agreements or bank statements behind it; revenue generation; profitability. A credit rating, if you have one, goes in too.

Proof of employment. Total direct employment, and within it the details the form asks for separately: women employees, persons with disabilities, employees from SC and ST categories, and employees based in non-metro cities. The statute's phrase is "employment generation or wealth creation" — the form makes you show the employment, person by person, category by category.

The Board meets periodically and decides in batches. To give you the scale of a batch: at its 79th and 80th meetings, the second of them on 30 April 2025, it cleared 187 startups between the two sittings, taking the total exemptions granted since the scheme began past 3,700, as the Press Information Bureau reported on 15 May 2025. I am not quoting that as an approval rate — the release does not publish how many applied, and you should distrust anyone who converts it into your "chances". What it does tell you is that decisions arrive meeting by meeting, and a thin application waits, or fails, meeting by meeting.

Two powers at the end of the process deserve respect. The Board may call for further documents and make its own enquiries before it grants the certificate or rejects the application with reasons. And a certificate obtained on information later found false can be revoked — in which case it is treated as if it had never been issued.

Applying, step by step

The application — the Income Tax Department calls it the application in Form-1; the Startup India portal hosts it as the 80-IAC form — is filed online, after recognition:

1. Log in to the Startup India portal and go to Recognition, then Apply for Tax Exemptions.
2. Open the income tax exemption application. Your recognition details are pulled in automatically; confirm them before you build on them.
3. Complete the exemption evaluation and broad-parameters sections — the scorecard above, field by field.
4. Attach the documents: the memorandum of association for a company, or the LLP deed for an LLP; board resolution, if any; the shareholding pattern, as per the memorandum and as it currently stands; income tax return acknowledgements for the past three years, or as applicable; audited financial statements — balance sheet and profit and loss — for the past three years, certified by a chartered accountant, with revenue and profit or loss detail; the chartered accountant's certificates on formation and scalability; your pitch deck; proof of intellectual property, awards, funding and employment where you have them.
5. Give the self-certification the form asks for — that the startup was not formed by reconstruction or splitting, and that the information has been duly audited by a chartered accountant — accept the terms, and submit.

Think of the application the way a lender thinks of a loan file. The certificate at the end matters, but the Board is really reading the file underneath it — accounts, certificates, evidence — and deciding whether the story holds together. Founders who assemble that file before they need the answer rarely struggle. Founders who start assembling it after turning profitable discover that the Board's questions reach back to their very first year.

Choosing your three years

Getting the certificate is half the work. Spending the three years well is the other half.

Do not start the clock in a year with little or no profit. A holiday year spent sheltering ₹4 lakh of profit is gone forever, and it cannot be moved to the year you make ₹4 crore. Look at your projections honestly, and begin the block where sustained profit begins — keeping one eye on the turnover ceiling for the year you are claiming in: ₹100 crore for a claim under the 1961 Act, ₹300 crore for a claim from tax year 2026-27 under Section 140. What matters is turnover in the year your claim relates to. Growth that takes that year's figure past its ceiling puts that claim year outside the holiday, whatever your earlier years looked like.

One computation rule catches people out. For the deduction, your eligible business is treated as if it were your only business. Its own brought-forward losses are set off against its profits first, and the deduction is worked out on what remains — the Income Tax Department's worked examples show this plainly, year by year. Early losses are not wasted; they reduce the profit the holiday needs to shelter, which is one more reason to time the block with your chartered accountant rather than by instinct.

Claiming it in the return — and the tax that survives

The certificate alone does not deliver the deduction. Each year you claim, three things must line up:

Audit and Form 10CCB. Your accounts for the claim year must be audited by a chartered accountant, and the audit report furnished electronically in Form 10CCB one month before the due date for furnishing the return under Section 139(1). Treat that date as hard. Tribunal decisions go both ways on late reports, and no founder should build a three-year tax plan on winning that argument.

A return filed on time. The deduction is claimed in the return of income, furnished on or before its Section 139(1) due date. A belated return is not the place to test whether a profit holiday worth crores survives.

Minimum tax, honestly faced. The holiday cuts your normal income tax. It does not cut every tax. A company remains within minimum alternate tax, which is charged on book profit — and a deduction under Chapter VI-A does not reduce book profit. An LLP claiming this deduction comes within alternate minimum tax under Section 115JC instead. Model the cash tax in your holiday years with your chartered accountant before you promise the board three tax-free years. There may still be a cheque to write.

And one fork in the road to check before anything else: a company that has opted for the concessional regime under Section 115BAA computes its income without this deduction at all. If your company has already made that election, the 80-IAC route is closed to it, certificate or no certificate. Check the election first. It takes five minutes and saves a wasted application.

A note on the new Income-tax Act

The Income-tax Act, 2025 came into force on 1 April 2026, and the startup deduction continues under it as Section 140 — same three years out of ten, same company-or-LLP definition, same Board certificate. One term did change, and it is the one founders trip over. The Finance Act, 2026 amended Section 140 to set the turnover ceiling at ₹300 crore in the claim year, for claims from tax year 2026-27. The ₹100 crore ceiling governs claims for periods under the 1961 Act only. Do not carry it forward into a new-Act claim. Claims for periods governed by the 1961 Act remain Section 80-IAC claims, which is why everyone, including the Startup India portal, still uses the old number. Whichever Act governs your claim year, the eligibility work in this post is the work you have to do; confirm the form references for your specific year with your chartered accountant when you file.

The short version

Recognition makes you a startup. Only the Board's certificate makes your profits tax-free, and the Board grants it to companies and LLPs that are young enough, small enough, genuinely new in what they do, and able to prove growth, traction and employment with documents rather than adjectives. Win the certificate early, spend the three years on real profit, and file the audit report and the return on time, every time.

If you want the eligibility test run against your own facts before you apply — entity, vintage, turnover, the reconstruction and machinery conditions, and the evidence file the Board will score — that is exactly the work covered in the Section 80-IAC section of our DPIIT recognition benefits page. Bring your last three years' accounts. We will tell you plainly whether an application is worth filing, and what to fix first if it is not.