Startup Tax Exemption U/s 80IAC
Online DPIIT Application Filing
Under the Startup India Scheme of the government 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
Newly established and incorporated startups often need more financial resources during their initial stages of operations, which negatively impacts their sales and profits. The situation worsens further when a huge chunk is paid in taxes out of the minimal income they earn. Only a little profit is left behind for reinvestment. Realising this struggle, the government of India introduced Section 80-IAC and Section 56 of the Income Tax Act, 1961, which allows tax exemption for three consecutive financial years out of ten from the date of incorporation to eligiblestartups recognised by the DPIIT .
About 80IAC Tax Exemption
- DPIIT Recognition Required
- 100% Tax Exemption
- ax Exemption for 3 Years
- Online Application Process
- Company, LLP & Firms are eligible
Eligibility / Checklist for 80IAC Startup Tax Exemption
The 80IAC Startup Tax exemption criteria depend on factors like DPIIT Recognition, the 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 criteria below. Ensure all eligibility criteria are satisfied before applying for tax exemption under section 80IAC.
Eligible Business Types
Not all the business structures are eligible for Startup Tax Exemption, and The startup must be a Company, LLP, Company , LLP, or a registered partnership firm. Startups established as any other business structure, such as sole proprietorship, are not eligible under the Startup India Scheme of DPIIT.
Startup Recognition by the DPIIT
The Department of Promotion of Industry and Internal Trade (DPIIT) must recognize startups, and the startup must obtain a DPIIT Recognition Certificate. The process of obtaining Startup Recognition is online and easy. Team setindiabiz helps obtain Startup Recognition.
Incorporated after 1st April 2016
Any startup incorporated/registered after 1st April 2016 and not older than ten years can avail of the tax exemption u/s 80IAC. The DPIIT Startup Tax Exemption is available only for companies with all Indian Promoter. The companies or LLPs with FDI are not eligible.
New and Original Entity
The applicant must be a new incorporation and should not have been formed by splitting up or reconstructing an existing business. The plant and machinery used by the startup must be new and should not be old or a transfer from an existing plant and machinery already in use.
Turnover not exceeding Rs.100 crores.
The turnover of the applicant startup must not exceed Rs. 100 crores in the Financial Year for which the deduction is claimed. The objective of the Startup India initiative is to provide growth opportunities to budding startups and not to established businesses.
Innovation & Employment Generation
The startup must have a portfolio of innovative products, services, or processes. Or the development of new or innovative products, services, or processes with the primary aim of financial growth, employment generation, and wealth creation.
Timeline for
80IAC Recognition
The time needed to apply is close to ten days. However, the overall time required may be approximately six months.
Schedule Callback!Analysis of the Startup
Our experts will analyse the eligibility criteria of the startup based on the documents submitted and the filled questionnaire. They shall review the pitch deck and video presentation in the first stage
Drafting of Documents
For the DPIIT Recognition, we will then draft the necessary documents for the signature of the authorised representative. We also draft the justification for the grant of tax exemption to the startup in line with the For the DPIIT Recognition, we will then draft the necessary documents for the signature of the authorised representative. We also draft the justification for the grant of tax exemption to the startup in line with the guidelines.
Filing of Application
We then submit the application under section 80IAC for startup tax exemption, which is authenticated with the DSC of the authorised representative.
Keep Track of Application
After applying for the startup tax exemption grant under Section 80-IAC and Section 56 of the Income Tax Act, 1961, we have to keep track of the application, and in case of any resubmission remarks or clarification, the same needs to be adequately addressed.
List of Documents for DPIIT Startup Tax Exemptions
Documentation is significant in obtaining the startup tax exemption; most documents are essential for every startup. The following is a list of documents you should prepare to apply for a startup tax exemption.
Documents of Director/ Shareholder
| No | List of Documents | Description |
|---|---|---|
| 1. | DPIIT Recognition Certificate | The applicant must be recognised as a startup and submit the recognition certificate duly attested by the authorised signatory or director. |
| 2. | Incorporation Certificate | The ROC issues the certificate of incorporation in the case of the company and LLP, and in the case of the partnership firm, the certificate of registration issued by the Registrar of Firms is required. |
| 3. | MOA / Partnership Deed | The Memorandum of Association (MOA) for companies or the LLP Agreement in case of the LLP and the partnership deed is required if the applicant is a partnership firm. These documents need attestation by the applicant's authorised signatory. |
| 4. | Financial Statements | Financial statements as under for the past three years or from the year of incorporation, whichever is less. All these must be certified by a Chartered accountant
The newly incorporated startup needs to submit a provisional balance sheet along with the declaration to this effect. |
| 5. | Pitch Deck & Video | Pitch deck and video are necessary for the startup to make 80IAC applications. This means the start-up must be at the stage of early traction or scaling.
|
| 6. | Aadhar of Authorised Signatory | Aadhar Card is submitted as proof of identity from the authorised signatory of the applicant company. The copy of aadhar needs self attestation by the said authorised signatory |
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.
Process of Obtaining Section 80IAC Startup Tax Exemption
After getting Startup recognition, a Startup may apply for a tax exemption under section 80 IAC read with section 56 of the Income Tax Act. If the application is approved, the Startup can avail of a tax holiday for three consecutive financial years out of its first ten years since incorporation. 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.
Schedule Callback!Step-1 : Documentation
Section 80IAC registration process for Startups is completely application-based. So, the chances of its approval depend on the accuracy of the 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. 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 DPIIT recognises the startup, 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, etc. 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 submit your application to the Startup India Portal. The Department will process the application 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 an 80IAC Tax Exemption Certificate.
After the application is approved, the DPIIT will grant the applicant startup an 80IAC tax exemption Certificate. 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 ensure that your Startup gets 100% exemption for three consecutive years. How exactly would this contribute to the growth and success of a Startup? The Section 80IAC benefits listed below will provide clear insights. These benefits work phenomenally across the spectrum for all kinds of recognised startups in India.
100% Tax Deduction
Recognised Startups receive a 100% tax deduction on profits. This eliminates any tax payment requirement during the crucial initial phases.
Tax Exemption for Startups
Startup tax benefits under 80IAC extend for three 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 help cope 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 online application process.
Frequently
Asked
Questions
Frequently Asked Questions
Section 80-IAC of the Income Tax Act provides eligible startups in India with a 100% tax exemption on profits for three consecutive assessment years within the first 10 years of incorporation. To qualify, the startup must be a recognized entity by DPIIT, incorporated as a Private Limited Company or LLP between April 1, 2016, and March 31, 2025, with annual turnover not exceeding ₹100 crore.
The DPIIT approves the application for Startup Tax deduction under Section 80IAC. The Inter-Ministerial Board (IMB), set up under the Department for Promotion of Industry and Internal Trade (DPIIT), approves the tax exemption under Section 80-IAC for eligible startups in India.
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.
The exemption under Section 80-IAC can be revoked if the startup ceases to meet the eligibility criteria, such as exceeding the ₹100 crore turnover limit, engaging in activities outside the scope of innovation or scalable business, restructuring through splitting or reconstruction of an existing business or providing false information to obtain the exemption.
Suppose your exemption under Section 80-IAC is revoked. In that case, the tax benefits claimed during the exempted years may be withdrawn, and you could be liable to pay taxes along with applicable interest and penalties for those years. It is essential to ensure continued compliance with eligibility criteria to avoid revocation and associated consequences.