Startup Tax Benefits

Key facts

• 80-IAC tax holiday: 100% deduction of profits for any 3 consecutive years out of the first 10 years from incorporation.
• Only DPIIT-recognised private limited companies and LLPs incorporated before 1 April 2030 can claim it, after a separate certificate from the Inter-Ministerial Board (IMB).
• Angel tax (tax on share premium above fair value, old section 56(2)(viib)) was abolished for all investors from FY 2025-26.
• For eligible startups, employees can defer tax on ESOPs (perquisite) until the earliest of: 5 years from allotment, leaving the company, or selling the shares.
• MAT still applies to companies claiming the tax holiday unless they are in the 22% concessional regime (which doesn't allow 80-IAC).

Common questions

What is the 80-IAC tax holiday?

A 100% deduction of profits for any 3 consecutive years out of the first 10 years. It is for DPIIT-recognised private limited companies and LLPs incorporated before 1 April 2030, and needs a separate approval from the Inter-Ministerial Board.

Is angel tax still applicable?

No. The tax on share premium received above fair value (angel tax) was abolished for all classes of investors from FY 2025-26.

Can a startup LLP claim 80-IAC?

Yes. Both private limited companies and LLPs recognised by DPIIT can apply, if incorporated before 1 April 2030 and approved by the Inter-Ministerial Board.

Sources

• Income-tax Act, 2025