Section 80-IAC: Claiming Tax Exemption as a DPIIT-Recognised Startup

Section 80-IAC of the Income Tax Act offers eligible startups a full 100% deduction on profits for any three consecutive assessment years out of the first ten years from incorporation. For a startup growing rapidly, this can mean significant tax savings at exactly the stage when capital is most needed.

Eligibility Requirements

• Company or LLP must be incorporated between April 1, 2016 and April 1, 2030
• Must be recognised by DPIIT (Department for Promotion of Industry and Internal Trade)
• Annual turnover must not exceed ₹100 crore in the year for which the deduction is claimed
• Startup must be working towards innovation, development, or improvement of products or processes
• Deduction can only be claimed after obtaining approval from the Inter-Ministerial Board (IMB)

The IMB Approval Process

The Inter-Ministerial Board evaluates applications on the degree of innovation, scalability, and employment potential. Applications can be submitted online through the Startup India portal. Typical processing time is 60–90 days. Importantly, DPIIT recognition and IMB approval are two separate steps — many startups have DPIIT recognition but have not applied for IMB approval, leaving 80-IAC benefits unclaimed.

Common Audit Triggers

The income tax department has been scrutinising 80-IAC claims more closely following a surge in filings. Common triggers include: claiming the deduction without valid IMB approval; turnover exceeding ₹100 crore in the claim year; claiming deductions on income from activities outside the core innovation business; and selecting non-consecutive assessment years without proper justification. Accountrix works closely with early-stage startups to ensure DPIIT recognition, IMB applications, and annual compliance are handled correctly.