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    Startup tax holiday (Section 80-IAC) (80-IAC)

    An eligible startup, DPIIT-recognised and incorporated as a company or LLP, can claim a 100% deduction of its profits for any three consecutive years out of its first ten under Section 80-IAC. Budget 2025 extended the eligibility window to startups incorporated before 31 March 2030, and the angel-tax provision (Section 56(2)(viib)) was abolished from financial year 2025-26. The catch: Minimum Alternate Tax or AMT at 15% still applies, so the holiday reduces normal tax but not the MAT/AMT floor.

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    What this relief is, in plain English

    Section 80-IAC is the headline startup tax break: pick your three best consecutive profit years out of your first ten, and pay no normal income tax on those profits. You must be recognised by DPIIT and meet the eligibility tests. Two pieces of good news: the window to qualify now runs to startups set up before 31 March 2030, and the much-criticised angel tax on share-premium funding has been abolished. The one thing it does not switch off is MAT/AMT at 15%, so model that floor into your cash planning.

    How it works

    Pick 3 of your first 10 years

    The 100% profit deduction applies for any three consecutive assessment years chosen by the startup out of the ten years from incorporation. You choose the window, typically your first profitable years, to maximise the benefit.

    Eligibility tests

    You must be a private limited company or LLP, recognised by DPIIT as an eligible startup, incorporated before 31 March 2030, with turnover not exceeding Rs 100 crore in the relevant year, and working on innovation, development or improvement of products/processes or a scalable model with high employment/wealth-creation potential.

    MAT/AMT still bites

    The deduction reduces tax under the normal provisions, but Minimum Alternate Tax (companies) or Alternate Minimum Tax (LLPs) at 15% of book profit/adjusted total income still applies. MAT/AMT credit can be carried forward, but plan cash for the 15% floor during your holiday years.

    Who qualifies

    Interactions with other reliefs

    Angel tax (s.56(2)(viib))

    Abolished from FY2025-26, share-premium funding above fair value is no longer taxed, removing a major early-stage risk

    MAT / AMT (15%)

    Still applies during the holiday, the deduction does not remove the 15% floor; credit carries forward

    Carry-forward of losses (s.79)

    Eligible startups get relaxed loss-carry-forward conditions on shareholding change, useful alongside the holiday

    Common mistakes + audit triggers

    Worked example

    Nova Labs Pvt Ltd, Bengaluru - DPIIT-recognised SaaS startup, incorporated 2026 (2026-27)

    Nova Labs turns profitable in its third year and expects Rs 2 crore, Rs 5 crore and Rs 8 crore of profit in years 3, 4 and 5, with turnover under Rs 100 crore throughout.

    Calculation: By electing Section 80-IAC for years 3 to 5 (its three best consecutive years), Nova Labs claims a 100% deduction on Rs 15 crore of profits, paying no normal corporate income tax on them. MAT at 15% of book profit still applies in those years (carried forward as credit), so it models that floor into cash flow. Because it raised a funding round at a premium, the abolition of angel tax from FY2025-26 means that share premium is not taxed, removing a risk that used to hit startups at exactly this stage.

    Statute reference: Income-tax Act 2025 s.140 (Income-tax Act 1961 s.80-IAC) s.80-IAC (deduction); s.56(2)(viib) angel tax abolished FY2025-26; MAT s.115JB / AMT s.115JC. Source / notes: DPIIT Startup India recognition; Budget 2025 window extension to 31 Mar 2030.

    Frequently asked questions

    Who qualifies for the Section 80-IAC startup tax holiday?+
    A private limited company or LLP that is recognised by DPIIT as an eligible startup, incorporated before 31 March 2030 (the window was extended by Budget 2025), with turnover not exceeding Rs 100 crore in the relevant year, and working on innovation or a scalable, high-potential model. Sole proprietorships and ordinary partnership firms do not qualify.
    How much tax does the holiday actually save?+
    It gives a 100% deduction of profits for any three consecutive years out of the first ten, so no normal income tax on those profits. But Minimum Alternate Tax (or AMT for LLPs) at 15% of book profit still applies during the holiday, so you still pay that floor; the MAT/AMT credit can be carried forward.
    Is angel tax still a risk for my startup?+
    No. The angel-tax provision under Section 56(2)(viib), which taxed share premium received above fair value, was abolished from financial year 2025-26. That removes a significant risk that used to hit early-stage startups raising funds at a premium. Other diligence on valuations and documentation still matters, but the specific angel-tax charge is gone.
    Which three years should I choose for the deduction?+
    Choose the three consecutive years (within your first ten) where your taxable profits are highest, because the deduction is 100% of profits, claiming it in low-profit years wastes it. Many startups elect the holiday once profits scale, not at the loss-making start. Model it alongside the 15% MAT/AMT floor and your loss carry-forwards.

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