Section 80-IAC Registration allows eligible startups to claim 100% income tax exemption on profits for three consecutive years. Understand eligibility, benefits, documents required, and the complete legal process in India.

What is Section 80-IAC of the Income Tax Act, 1961?

Section 80-IAC of the Income-tax Act, 1961 provides a 100% deduction of profits and gains derived from an eligible business carried on by an eligible startup. This deduction is available for any three consecutive assessment years chosen by the startup, out of the first ten years from the date of incorporation.

The purpose of this provision is to encourage innovation-driven entrepreneurship in India by offering a tax holiday at the stage when startups need financial flexibility the most. Instead of paying income tax during profitable years, startups can reinvest their earnings into expansion, technology, manpower, and market development.

Who is Eligible for Section 80-IAC Registration?

To claim benefits under Section 80-IAC, a startup must strictly comply with the eligibility conditions prescribed under the Income-tax Act and related government notifications. These conditions ensure that only genuine and innovative startups receive the tax benefit.

1. Eligible Entity

The startup must be incorporated in India as either a Private Limited Company or a Limited Liability Partnership (LLP). Other forms of entities are not eligible under this section.

2. Date of Incorporation

The entity must be incorporated on or after 1 April 2016 and within the time period notified by the Central Government. The incorporation date plays a critical role in determining eligibility.

3. Nature of Business

The startup must be engaged in innovation, development, or improvement of products, processes, or services. Alternatively, it should operate a scalable business model with high potential for employment generation or wealth creation. Traditional or routine businesses without innovation may not qualify.

4. Turnover Limit

The annual turnover of the startup must remain within the limits prescribed under Startup India guidelines. Exceeding the turnover limit may result in loss of eligibility.

5. No Splitting or Reconstruction

The startup should not be formed by splitting up or reconstructing an existing business. This condition ensures that tax benefits are not misused by older businesses restructuring themselves.

6. Mandatory Certification

Approval from the Inter-Ministerial Board of Certification is compulsory. Without this approval, deduction under Section 80-IAC cannot be claimed.

Key Benefits of Section 80-IAC Tax Exemption

✔ Flexible Selection of Years
The deduction can be claimed for any three consecutive years within the first ten years of incorporation.

✔ 100% Tax Deduction
Eligible startups can claim 100% deduction of profits earned from eligible business activities.

✔ Better Cash Flow
By eliminating income tax liability, startups can reinvest profits into business growth and operations.

✔ Strong Legal & Financial Compliance
Section 80-IAC registration improves financial credibility with investors and authorities.

Legal Provisions Covered Under Section 80-IAC

Section 80-IAC is structured into multiple sub-sections, each defining a specific legal requirement.

• Sub-section (1) grants a 100% deduction of profits and gains derived from eligible business.
• Sub-section (2) allows startups to choose any three consecutive assessment years.
• Sub-section (3) defines what constitutes an eligible startup and eligible business.

Strict adherence to these provisions is necessary, as non-compliance may lead to rejection of the claim or future tax scrutiny.Who Can Apply?
A DPIIT-recognized startup that meets the following criteria:
 · Incorporated as a Private Limited Company or LLP.
 · Should be incorporated on or after 1st April 2016.
 · Must be less than 10 years old.
 · Annual turnover should be less than ₹100 crore in any financial year.
 · Should be working towards innovation, improvement of products/processes/services, or scalable business models with high potential for employment or wealth creation.
 · Should not be formed by splitting or reconstructing an existing business.

Required Documents for Application

To apply for 80-IAC exemption, applicants should keep the following documents ready and submit them as part of the application process:

Shareholding Details: Shareholding pattern as per the Memorandum of Association and the latest updated shareholding structure.

Board Resolution: Copies of resolutions passed in connection with the application and/or confirmation of eligibility.

Income Tax Returns: Acknowledgement receipts for the last three years (or as applicable).

Audited Financial Statements: Balance Sheet and Profit & Loss Statement for the last three years (or as applicable), including specific information on revenue earned and profit/loss recorded during those periods.

Chartered Accountant (CA) Certification:

o for Formation of Startup : A CA-authorised letter confirming that:

the startup is not formed by splitting up or reconstruction of an already existing business, except where applicable under Section 33B of the Income Tax Act;

the startup is not formed by the transfer of machinery or plant previously used for any purpose.
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf1.pdf

o Declaration of Scalability : Required if there is a >10% revenue growth from one year to the next OR 25% growth over 2 years OR over 33% growth over 3 years.
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf2.pdf

Proof of Credit Rating: If a credit rating has been obtained from an accredited agency, supporting documents should be uploaded.

Intellectual Property Rights (IPR): Proof of IPR filings, such as:

Patent/Copyright/Industrial Design filings;

Journal publications of patents/copyrights/designs;

Granted patents/copyrights/designs (where available).

Awards and Recognitions: Proof of awards received at different levels, such as:

District-level awards by government or corporate bodies;

State-level awards by government authorities;

National-level awards by government bodies or recognized international agencies (if applicable).

Pitch Deck: Any relevant pitch deck or presentation covering the business model, product/service, market opportunity, and growth roadmap.

HR Declaration & Employment Records:

o Regarding Employees Pursuing/ Holding M.Tech/PhD Degrees and Research Papers/Publications:
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf3.pdf

o Total direct employment details:
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf4.pdf

o Employment of Females, Persons with Disabilities, Persons from SC/ST Categories:
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf4.pdf

o Employees Based in Non-Metro Cities:
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf4.pdf

Proof of Investment Received:
Click here to view format
https://www.startupindia.gov.in/content/dam/invest-india/80iac/document-pdf-5.pdf

o Declaration Regarding Funding Obtained and Investor Details:
Provide a declaration covering funding raised and investor particulars.

o Term sheets, investment agreements, or bank statements showing external funding amounts; Investor certificates, funding agreements, or tax returns/GST filings substantiating revenue figures.
Attach term sheets/agreements/bank proofs and relevant filings or documents supporting disclosed figures.

Step-by-Step Process for Section 80-IAC Registration

The Section 80-IAC registration process involves a structured series of statutory and procedural steps that must be followed carefully. Each stage plays a crucial role in determining whether a startup qualifies for income tax exemption under the Income-tax Act.

Step 1: Obtain DPIIT Startup Recognition

The first requirement is to obtain recognition under the Startup India initiative from the Department for Promotion of Industry and Internal Trade (DPIIT).

Startups must apply through the official Startup India portal:
👉 https://www.startupindia.gov.in/

Without DPIIT recognition, a startup is not eligible to apply for tax exemption under Section 80-IAC.

Step 2: Apply for Section 80-IAC Approval

After receiving DPIIT recognition, the startup must submit a separate application for tax exemption under Section 80-IAC through the Startup India portal.

Direct application link:
👉 https://www.startupindia.gov.in/content/sih/en/startupgov/startup_recognition_page.html

Alternatively, the application can be accessed through the following navigation path:

Login → Dashboard → My Services → Show All → 80-IAC Registration

This approval is not automatic and requires complete disclosure of business details, innovation aspects, and financial information.

Step 3: Upload Required Documents

All supporting documents, including financial statements, CA certifications, shareholding details, and scalability declarations, must be uploaded accurately on the Startup India portal. Any mismatch, incomplete filing, or incorrect information may result in queries, delays, or rejection.

Step 4: Review by Inter-Ministerial Board

Once the application is submitted, it is reviewed by the Inter-Ministerial Board of Certification. The Board evaluates eligibility, innovation criteria, financial compliance, and adherence to Section 80-IAC conditions. Approval is granted only after full satisfaction of statutory requirements.

Step 5: Claim Deduction in Income Tax Return

After receiving approval, the startup must properly claim the deduction under Section 80-IAC while filing its Income Tax Return (ITR) for the selected assessment years. Accurate disclosure and computation are essential to avoid future tax scrutiny.

Common Mistakes Startups Should Avoid

• Assuming DPIIT recognition automatically grants 80-IAC tax exemption
• Submitting weak business or innovation descriptions
• Incorrect selection of assessment years
• Non-compliance with turnover limits

Professional guidance helps avoid these errors.

Why Choose Bharat e-Filing for 80-IAC Registration?

• Complete legal analysis as per Income-tax Act
• End-to-end application handling
• Documentation and compliance support
• Assistance with Inter-Ministerial Board requirements
• Transparent and reliable service

Conclusion

Section 80-IAC Registration is one of the most valuable tax benefits available to startups in India. When applied correctly, it provides substantial tax savings and improves financial planning during crucial growth years. With proper compliance and expert support, startups can fully utilise this legal tax incentive under the Income-tax Act.

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