
Section 80-IAC: The Game-Changer Tax Exemption Every Indian Startup Should Know in 2025
Faridabad, India – India is home to one of the fastest-growing startup ecosystems in the world, but many founders struggle with one of the biggest challenges: managing finances and taxes in the early years of business. High tax burdens often drain the limited capital that startups desperately need for scaling, hiring, and product development.
To address this, the Government of India introduced Section 80-IAC of the Income Tax Act — a powerful tax exemption designed exclusively for eligible startups. Under this scheme, recognized startups can enjoy 100% income tax exemption on profits for three consecutive years within their first ten years of incorporation. For entrepreneurs looking to reinvest every rupee into growth, this provision can be a game-changer.
What is Section 80-IAC?
Section 80-IAC was introduced to encourage entrepreneurship and innovation by reducing the initial tax burden on startups. The provision allows eligible startups to claim a 100% tax holiday on profits for any three consecutive assessment years out of the first ten years since incorporation.
This exemption ensures that instead of paying taxes in the crucial early stages, startups can redirect funds towards:
- Expanding operations
- Hiring skilled employees
- Investing in technology and infrastructure
- Marketing and customer acquisition
Eligibility Criteria for Section 80-IAC
Not every new business automatically qualifies for this benefit. The government has laid down specific eligibility conditions:
- The startup must be incorporated as a Private Limited Company or a Limited Liability Partnership (LLP).
- It must be incorporated on or after April 1, 2016.
- The startup must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT).
- Annual turnover should not exceed ₹100 crore in any of the previous financial years.
- The business model must demonstrate innovation, improvement of products/services/processes, or high potential for employment generation or wealth creation.
These conditions ensure that only genuine, innovative ventures can benefit from the exemption.
How to Claim the 80-IAC Tax Exemption
Claiming this exemption requires following a structured process:
- Obtain DPIIT Recognition
The startup must first register with DPIIT. This recognition is mandatory for availing all startup-related benefits, including Section 80-IAC. - Apply for IMB Certification
The next step is to apply to the Inter-Ministerial Board (IMB) for approval. The application involves submitting incorporation documents, detailed business plans, and evidence of innovation or scalability. - Claim the Exemption While Filing ITR
Once IMB approval is granted, the startup can claim the exemption in its Income Tax Return (ITR) for the relevant three years it chooses within the ten-year window.
Why Section 80-IAC Matters for Startups in 2025
For a bootstrapped or newly funded startup, even a small tax burden can restrict growth. Section 80-IAC addresses this pain point directly. Some of the key benefits include:
- Massive Tax Savings: Depending on revenue, this can amount to lakhs or even crores saved over three years.
- Improved Cash Flow: Startups can reinvest tax savings into operations and expansion.
- Faster Scalability: Extra funds help in hiring talent, expanding markets, and innovating faster.
- Encouragement for Risk-Taking: Reducing early tax liability makes entrepreneurship less financially risky.
In short, this tax holiday provides startups with a stronger runway during their most critical years.

Common Mistakes Founders Make While Applying
Despite the clear advantages, many startups miss out on this benefit due to errors such as:
- Not applying for DPIIT recognition in time.
- Incorrect documentation during IMB application.
- Misunderstanding eligibility conditions (e.g., turnover criteria).
- Failing to claim the exemption correctly while filing ITR.
Avoiding these mistakes requires expert guidance and professional handling.
How Nvedya Professionals LLP Supports Startups
While Section 80-IAC is highly beneficial, the process of securing DPIIT recognition and IMB approval can feel overwhelming for founders who are already juggling multiple responsibilities.
This is where Nvedya Professionals LLP plays a crucial role. As a leading financial and compliance advisory firm, Nvedya assists startups across India in:
- Applying for DPIIT recognition.
- Preparing and submitting documentation for IMB certification.
- Filing ITRs accurately to claim the exemption.
- Advising on other tax benefits and compliance strategies available to startups.
By acting as a partner rather than just a service provider, Nvedya ensures that founders can focus on scaling their business while compliance is managed seamlessly.
Conclusion
In 2025, startup founders cannot afford to overlook financial opportunities like Section 80-IAC tax exemption. With the potential to save crores in taxes and reinvest in growth, this provision is one of the most impactful benefits available under Indian tax law.
However, claiming it requires precision, compliance, and timely action. By working with professional advisors like Nvedya Professionals LLP, startups can unlock this powerful exemption without the stress of navigating complex regulations alone.
About Nvedya Professionals LLP
Nvedya Professionals LLP is a Faridabad-based consultancy firm specializing in tax advisory, GST compliance, company registration, startup consultancy, and corporate legal services. With a team of experienced Chartered Accountants, Company Secretaries, and financial experts, the firm delivers digital-first services to startups, MSMEs, and enterprises across India.
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