Under the Startup India initiative of the Government, launched on 16th January 2016, eligible companies can be recognized as Startups by DPIIT (Department for Promotion of Industry and Trade) to access a host of tax benefits, easier compliance, IPR fast-tracking & more. Learn more about eligibility and benefits below.

Typically Under the Startup India Action Plan, Startups that meet the definition as prescribed under G.S.R. Notification 127(E) are eligible to apply for recognition under the program.

An entity that fulfills the following conditions can enter into the Startup Recognition scheme:

• Company’s Age: An entity registered for not more than 10 years as a Private Limited Company, Partnership firm, or Limited Liability Partnership.
• Company Type: The company should have been incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India.
• Annual Turnover: The entity’s turnover has not exceeded one hundred crore rupees since incorporation/ registration in any financial year.
• Original entity: The entity should not have been formed by splitting up or reconstructing an already existing business
• Innovative: The startup that is working towards innovation, development, or improvement of products processes, or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Start-up India Scheme is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and startups in the country that will drive sustainable economic growth and generate large-scale employment opportunities.

A business will be recognized as a ‘Start-up’ under this scheme only after obtaining a Certificate of Registration from Start-up India Hub.

Section 80IAC: Tax Exemption for Startup

During the first few years of their existence, newly formed and incorporated startups frequently experience a lack of capital. Their earnings and sales are further negatively impacted by this. The situation deteriorates even more when a sizable portion of the money they make is paid in taxes. Rarely is there any profit left over for further investment.

After realizing this difficulty, the government gave startups multiple tax exemptions. One of them is the Income Tax Act’s Section 80IAC tax exemption. For startups approved by the DPIIT, Section 80IAC offers a 100% tax exemption. If the startup is qualified, it can benefit from the tax exemption for Startups for any three consecutive assessment years.

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Section 80IAC of the Income Tax Act: What is it?

The Income Tax Act of 1961 contains a unique section about the registered business known as Section 80IAC. On April 1, 2017, it came into effect. This clause states that for any three years in a row, an eligible assessee who is profitable can claim 100% tax deductions. It’s popularly known as the 80IAC deduction for eligible startups.

Minimizing tax evasion is the primary objective of this clause. Consequently, this tax benefit motivates India’s youth entrepreneurs to become truthful taxpayers.

Understanding Section 80-IAC: A Startup’s Lifeline

The Central government’s Section 80-IAC provision guarantees a deduction of 100% of profits from qualifying company activities, providing eligible startups with a lifeline. Startups are free to select any time frame during their first ten years following the year of incorporation, as this deduction is spread across a block of three consecutive fiscal years. This strategic adaptability offers fledgling businesses a crucial window of opportunity to steady operations and lay a solid infrastructure for future expansion.

Eligibility for the 80IAC Tax Exemption

The startup’s age, overall business turnover, and DPIIT Recognition are among the variables that determine the 80IAC Tax exemption criteria. Additionally, to be eligible for the tax exemption, the products or services must be innovative.

All startups that have received DPIIT recognition are not eligible for 80IAC Tax Exemption.

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To find out if you qualify, consider the following details:

• You hold a DPIIT certificate;
• Private Limited Companies and Limited Liability Partnerships are the only entities eligible for the 80 IAC tax exemption;
• The entity is incorporated after 1st April 2016
• You are eligible to claim a tax deduction for any three consecutive financial years out of the first ten years since incorporation;
• Furthermore, the startup requesting the 80 IAC tax exemption must be an original company, not one that was established as a result of a split or reconstruction of an existing business.
• The Startup should be working towards innovation/ improvement of existing products, services, and processes and should have the potential to generate employment/ create wealth.

Take Advantage of the Section 80 IAC Tax Exemption for Startups

Startups in India with DPIIT recognition might potentially save thousands or even millions of rupees in taxes! A recognized startup would receive a 100% tax exemption for three consecutive years of profitable operations under Section 80 IAC of the Income Tax Act. This is perhaps one of the most significant advantages of registering a business in India.

Register for Our Easy Process to Receive the 80 IAC Tax Exemption

We provide a simple and effective certification process as one of the best 80 IAC Tax Exemption Certificate Service Providers to enable your startup to take advantage of this tax exemption. To make the certification process easier for you, we have an online 80 IAC tax exemption certificate process for Startups.

An easy and quick certification procedure is guaranteed when you use our professional 80 IAC Tax Exemption Certificate Service.

EbizFiling.com is an eminent business platform and a progressive concept, that helps end-to-end incorporation, compliance, advisory, and management consultancy services to clients in India and abroad. Get the benefits of Startup Recognition for your One Person Company, Private Limited Company, Partnership firm, or LLP with Ebizfiling at affordable Prices. We also provide Startup Advisory Services at Ebizfiling. You may get in touch with our compliance manager on 09643203209 or email info@ebizfiling.com for a free consultation.