Startup Tax Exemption U/s 80IAC

Online DPIIT Application Filing

Under the Startup India Scheme of the govt of India, start-ups may apply for tax exemption for three years within ten years of their establishment. We assist the start-up in obtaining tax exemption u/s 80IAC.
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Tax Exemption for Startup under Section 80IAC - Overview

Newly established and incorporated startups often face shortage of financial resources during their initial stages of operations. This further has a negative impact on their sales and profits. The situation further gets worsened when out of the minimal income they earn, a huge chunk is paid as taxes. Hardly, any profit is left behind for reinvestment.
The government, realising this struggle, has allowed several tax exemption for Startups. One among them is tax exemption under Section 80IAC of the Income Tax Act. Section 80IAC provides a 100% tax exemption for startups recognized by the DPIIT. The tax exemption can be availed for any three consecutive assessment years, as long as the Startup is eligible.

Key Features of 80IAC Tax Exemption:

Play Video about How to claim 100 % Tax exemption for Startups under Section 80 IAC

80IAC Tax Exemption Eligibility Criteria

The 80IAC Tax exemption criteria depends on factors like DPIIT Recognition, age of the startup, and its overall business turnover. Also, the innovation factor in its products or services is crucial for claiming the tax exemption. We have explained all the 80IAC tax exemption eligibility criterias below. Ensure that all these criterias are met before the application for 80IAC exemption is actually filed.

Either a company or an LLP or registered partnership firm:
The startup must either be a Company or a Limited Liability Partnership or registered as a partnership firm. Startups established as any other business structure cannot claim this deduction.

Startup Recognition by the DPIIT:
The Department of Promotion of Industry and Internal Trade must recognize startups and the Startup has obtained DPIIT Recognition Certificate.

Incorporated after 1st April, 2016:
Any startup incorporated/registered after the 1st of April 2016 till date can avail the tax exemption u/s 80IAC

Not Exceeded 10 years since Incorporation:
Deduction can be claimed in any three years within the first 10 years from the Startup's incorporation.

New and Original Entity:
The startup must not be formed by splitting up or reconstruction of an existing business entity. There are few exceptions u/s 33B of the Income Tax Act.

Operates with New Plant and Machinery:
The startup must not be formed by the transfer of existing plant and machinery already in use.

Turnover not exceeding Rs.100 crores:
The turnover must not exceed Rs.100 crores in the Financial Year for which the deduction is claimed.

Objective of employment generation or wealth creation:
The startup must be operating with the primary aim of financial growth, employment generation, and wealth creation.

Must deal in innovative products, services, or processes:
The concerned startup must either develop new innovative products, services, or processes, or innovate an improved version of the existing ones. However, the entities formed by splitting up or reconstruction of an existing business are not eligible for DPIIT Startup Tax Benefits.

Checklist & Documents

The table below has two sections. The first one lists the prerequisites of Section 80IAC registration process. The second one, on the other hand, lists the documents required for the same. Meeting both these checklists is essential before filing the application for 80IAC tax exemption.
Minimum Requirements List of Documents
  • Certificate of Incorporation
  • DPIIT Startup Recognition
  • Registered and active mobile number
  • Registered and active email address
  1. CIN / LLPIN
  2. MOA / Partnership Deed
  3. Business PAN
  4. DPIIT Recognition Certificate
  5. CA Certified Balance Sheet for last 3 FY
  6. ITR of last 3 FY
  7. Section 56 Exemption Certificate
  8. Link to Video Presentation
  9. Pitch Deck
  10. Board Resolution (for company only)
Note: We recommend you send the soft copies of documents and filled questionnaires shared with you. We will verify the information and legal documents sent to us. Please contact us for further clarifications.

Section 80IAC Registration Process for Startups

Wondering how to apply for tax exemption online under Section 80IAC of the Income Tax Act? We have provided an easy stepwise guide for you to understand and navigate. You can apply for tax exemption certificate online on the Startup India Website. All you need to do is visit the website, login to your account and follow the procedure explained below.

Step-1: Documentation

Section 80IAC registration process for Startups is completely application-based. So, the chances of its approval depends on the accuracy of documents submitted. At Setindiabiz, we provide full documentation assistance as part of our 80IAC registration service. You can get your documents drafted and verified by experts to avoid any hassle later.

Step-2: Login to the Startup India Portal

After preparing all the necessary documents, the next step is to visit the official website of Startup India. Here, in the main menu, navigate to the “Recognition” option, and choose “Apply for Tax Exemptions” from the dropdown. You will be redirected to a page where you can access the 80IAC Application after signing into your account.

Step-3: Fill out the Application form

Fill out the 80IAC form with necessary details like name, address, and business activity of the startup. The applicant must provide his name and contact information as well. Since the startup is recognized by the DPIIT, you must submit the DIPP number, incorporation and PAN details.

Step-4: Upload all necessary attachments

After filling out all the details, upload the necessary documents. These include the MOA or LLP Deed, copy of annual accounts and ITR, video link, pitch deck and so on. A complete list of these documents is given in the section above.

Step-5: Enter the details of the authorised signatory

Lastly, provide basic details of the applicant or authorised signatory to complete the form. These include his name and designation in the Startup. Usually, the authorised signatory is one of the company’s directors or an LLP / Firm’s partners.

Step-6: Submit the Application

Once all the details have been filled out correctly you can finally submit your application on the Startup India Portal. The application will be processed by the Department in a few days. If all details and documents are found to be correct, the application will be approved by the Department.

Step-7: Get 80IAC Tax Exemption Certificate

After the application is approved, the DPIIT will grant an 80IAC tax exemption Certificate to the applicant Startup. This certificate will conclusively prove the eligibility of the Startup to claim Startup Tax Exemption under Section 80IAC.

Tax Benefits for Startups Under Section 80IAC

Startup India Tax benefits under Section 80IAC ensures that your Startup gets 100% exemption for any 3 consecutive years. How exactly would this contribute to the growth and success of a Startup? Well, the Section 80IAC benefits listed below will provide clear insights. These benefits work phenomenally across the spectrum for all kinds of recognized startups in India.

100% Tax Deduction

Recognised Startups receive 100% tax deduction on profits. This eliminates any requirement of tax payment during the crucial initial phases.

Tax Exemption for Startups

Startup tax benefits under 80IAC extend for any 3 consecutive financial years after DPIIT recognition. The applicant can choose these 3 FYs at will.

Reduced Tax Burden

Startup Tax Deductions u/s 80-IAC helps cope up with the heavy tax burden. New businesses usually face this burden during the starting stages.

Easy & affordable to claim

DPIIT Startup Tax Exemption under Section 80IAC can be claimed through a quick, cost-effective, and online application process.

Frequently Asked Questions

Yes, small businesses or registered MSMEs can avail 80IAC tax exemption if they are recognized as Startup by the DPIIT.
The application for Startup Tax deduction under Section 80IAC is approved by the DPIIT.
Tax Exemption for Startups under Section 80IAC can be availed for any three 3 consecutive years. The only condition here is that in all these 3 years the Startup’s eligibility for 80IAC tax exemption must prevail.
Only LLPs, Registered Partnership Firms, and Companies recognized as Startups by the DPIIT can claim Section 80IAC tax benefits.
No. A foreign business cannot be recognized as a Startup by the DPIIT. So, it cannot claim DPIIT Startup tax exemption u/s 80IAC.
The time required for 80IAC application to get approved depends on several factors. The final decision is in the hands of DPIIT’s inter-ministerial body. Hence predicting an exact date is not practical. However, usually the application gets processed within 2 to 3 weeks from the filing date.
The application for 80IAC tax exemption can be submitted free of cost. There is no government fee applicable for 80IAC application.
Yes. Startups can avail 80IAC exemption if it uses machinery, previously used outside India, but not by the concerned startup. Moreover, prior to its installation outside India, it must have never been in use in India by any business.

Reconstructed businesses cannot claim 80IAC exemption, unless they fall under section 33B of the Income Tax Act. This section allows a reconstructed industrial undertaking to claim 80IAC Tax exemption, if it was discontinued because of

  • Damage or destruction caused by natural calamities
  • Damage caused by riots / civil disturbances
  • Damage caused by accidental fire / explosion
  • Damage caused by or an act of the enemy
An entity shall cease to avail startup India tax exemption on completion of ten years from the date of its incorporation. Also, the recognition becomes invalid if its turnover for any financial year exceeds one hundred crore rupees.
Yes, small businesses or registered MSMEs can avail 80IAC tax exemption if they are recognized as Startup by the DPIIT.

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