80-IAC Tax Exemption

Section 80-IAC provides 100% exemption from income tax to the eligible startups for a period of 3 years. GarudaMudra supports in completion of documentation, compliance and approval – apply now with expert guidance.

1. Professional Advice For The Approval of Startup Tax Exemption Profile Web Line Icon.
2. Fast Filing and No Errors
3. 100% Compliance to the Rule of 80-IAC
4. Custom Fit for Any Application
5. Higher Chances of Approval

What is Section 80-IAC of India?

If you decide to open a business in India then it is obviously an amazing feeling However, starting a business in India has its own challenges. For the startup ecosystem, we have 80-IAC: Recognised start-ups can avail a deduction up to 100% of their profits in three out of ten years.

Now here’s the best part: You can pick whatever three years you want to claim this benefit. So most startups choose to use it in years with higher earnings, getting the maximum benefit.

Reminder: Only the profits from eligible business activities (innovative products, services or processes) are deductible. Income from investments or unrelated sources doesn’t qualify.

To be eligible, your startup has to have DPIIT recognition first (which comes with other perks such as IP registrations at a fast-tracked pace and easier compliance mechanisms).

Since then, hundreds of startups have used this exemption to reinvest in product development and marketing growth.

Who are eligible for the 80-IAC Tax Exemption?

Understandably, the government has laid out specific rules to ensure that this windfall is granted only to legitimate, innovative businesses:

Business Structure

Your startup should be incorporated in India as either:

1. A Private Limited Company, or
2. A Limited Liability Partnership (LLP)
3. Partnerships and single member limited liability companies are not eligible.

Business Nature

The companies that are taking part in your startup should be:

1. Inventing, improving, or creating a new product, service, or process
2. Scalable employment- or wealth-generating business model

It has to show originality — not simply mimic other successful ideas or operate as a big trading firm.

Incorporation Date

Your startup must have been incorporated on or after April 1, 2016 and an application may be submitted until March 31, 2030.

Turnover Limit

Your turnover in any financial year since incorporation should not be more than ₹100 crore.

Originality Clause

The startup has to be actually new, not created by re-organizing or splitting off from an established company. (There are some exceptions as in revival cases under Section 33B).

New Plant & Machinery

New equipment should constitute at least 80%. The used equipment investment value may not be greater than 20%.

Certifications Required

1. DPIIT Recognition (mandatory first step)
2. Inter-Ministerial Board (IMB) Certificate Endorsement to confirm the innovation and eligibility

Procedure to Claim 80-IAC Exemption?

Here’s a step-by-step process:

Step 1: Get DPIIT Recognition

Submit on Startup India portal about your company, founders and nature of business. This acknowledgment provides access to the exemption under 80-IAC.

Step 2: Gather All the Necessary Documents

Draft incorporation papers, PAN, audited financials and other documents (full list below). Missing documents often cause rejections.

Step 3: Build a great Application (Pitch Deck + Video)

Pitch Deck: Cover your problem, solution, market size and business model, team and projections.

Video: A brief 2-3 minute video that demonstrates your product/service, impact and scalability.

Step 4:Download and file the Tax Exempt Certificate by Mail

Apply on the Startup India portal, and remember to include your documents, pitch deck, video etc.

Step 5: IMB Review

Your application is considered by the Inter-Ministerial Board within approximately 120 days. They can request clarifications prior to approving.

Step 6: Collect your Certificate and Claim Deduction

If accepted, you will receive the 80-IAC exemption certificate. You are now eligible to claim the 3-year tax holiday in your ITR filings.

Documents Required

1. Foundational Documents
2. Memorandum of Incorporation / Agreement Between Partnerships and the Members Thereof
3. MOA & AOA (for companies)
4. PAN card of the entity
5. DPIIT Recognition Certificate
6. Financial Records
7. Balance sheets & P&L statements to be audited
8. ITRs since establishment (or last 3 years)
9. Provisional statements (if new)
10. Recent bank statements
11. Tax Documents
12. GST registration (if applicable)
13. Presentation Materials
14. Pitch deck
15. Video pitch link
16. Board Resolution
17. The consensus agreement of the directors (or members in LLPs)

Benefits of Section 80-IAC

1. No Income Tax for 3 Years — Keep 100% profit
2. Improve Cash Flow – More cash for growth, hiring, r&d or marketing
3. Stress Reduction – No heavy tax liability in the first few years
4. Investor Confidence – Government-approved startups get more funding
5. Encourages Innovation – More funds to invest in new products and services
6. Ease of business – Compliant with SVG/GIG tool & IPR filing made easier through laid out DPIIT recognition.

Why So Little Start-Up Approval?

1. High Standards of Innovation – We don’t believe in faking it till we make it.
2. Missing Documents – Poor Financials Missing documents or weak financials will reduce your application approval chances.
3. Indistinct Pitches – When your ideas are not well-described enough to understand, it is hard for a reviewer to believe in them.
4. Rule Misinterpretation – A lot of people apply without the Turnover/Date rules being met.

Revocation of Exemption

The exemption can be cancelled by the DPIIT if false information is detected. Consequences include:

Loss of all benefits

1. Penalties under the Income-tax Act, 1961
2. Possible legal action
3. Always give accurate and honest responses.