Section 80-IAC provides a 100% income tax exemption on profits for 3 consecutive assessment years within the first 10 years of incorporation for eligible startups.
- Incorporation se koi bhi 3years me exemption claim kar sakte hai. 3 years wo bhi consecutive 3 years out of 10 years. 100% profits exempt ho jayega
- Eligible for startups incorporated on or before 31 march 2030 as private limited company or LLP.
Eligibility Criteria
- Turnover Limit: Annual turnover must not exceed ₹100 crore in any financial year since incorporation.
- Recognition: Must hold valid DPIIT Startup Recognition Certificate. (ye taxtube legal team initiate kar sakti hai)
- Nature of Business: Must be working towards innovation, development, or improvement of products, processes, or services and should have scalable potential to generate employment or wealth. (detailed me explained below for better understanding)
- Original Entity: Startup should not be formed by splitting up or reconstructing an existing business and must use new plant or machinery.
- It means company fresh hona mandatory hai aur plant and machinery bhi new he use karni required hai for eligibility.
Nature of Business – Detailed Criteria under Section 80-IAC
- To qualify for tax exemption under Section 80-IAC, a startup must be engaged in a business that demonstrates innovation, development or improvement, and scalability.
- The business should contribute meaningfully to economic development by leveraging technology, creating jobs, and promoting wealth generation.
Key Parameters of Eligible Nature of Business
1.Innovation:
The startup must be working on a new product, process, or service, or significantly improving an existing one.
It should involve intellectual property, technology use, or a novel solution to an existing problem.
2. Development or Improvement:
The business must aim to enhance efficiency, usability, or effectiveness of an existing system, process, or service.
3. Scalability:
The startup should have a clear potential to grow quickly, either geographically or by market share, and should handle high volumes without proportional cost increase.
4. Employment Generation:
The business must have the potential to create jobs, directly or indirectly.
5. Wealth Creation:
Startups that contribute to the economy through value addition, exports, investor returns, or productivity improvement are considered eligible.
6. Tech-Enabled or IP-Based:
Investors favor startups that leverage technology or hold intellectual property (IP), such as SaaS platforms, AI tools, fintech, or biotech innovations.
7. Social or Environmental Innovation:
Investors also consider startups that are working on impactful sectors like clean energy, water conservation, healthcare access, or ed-tech using innovation.
What Is Not Considered Eligible Nature of Business
- Routine or replication-based services such as general trading or reselling.
- Entities formed by splitting or reconstructing an existing business.
- Startups without evidence of innovation, technology, or substantial improvement.
- Startups using second-hand machinery or old infrastructure without value addition.
The Tax exemption is subjective.
We have to prove ourself once claimed before the tax authorities.
So, documentation should be mandatory on or before claiming the exemption.
25 July 2025 
