MSME, startups and registrations · Startups, trusts and NGOs
Who qualifies as a startup under Startup India, and how does the section 80-IAC (now section 140) tax holiday work?
Short answer
Since February 2026, a company, LLP, registered firm or cooperative society up to 10 years old, with turnover up to ₹200 crore in every year and an innovative or scalable business, can be recognised by DPIIT. A recognised company or LLP incorporated before 1 April 2030, with turnover up to ₹100 crore, can deduct 100% of its profits for 3 of its first 10 years, with the Inter-Ministerial Board's approval.
DPIIT recognition (from 4 February 2026)
| Condition | Startup | Deep-tech startup |
|---|---|---|
| Form | Private limited company, LLP, registered partnership firm, or cooperative society | Same |
| Age | Up to 10 years from incorporation | Up to 20 years |
| Turnover | Not above ₹200 crore in any year | Not above ₹300 crore |
| Business | Innovation in products, processes or services, or a scalable model with high potential for jobs or wealth | Advanced technology with long development periods |
An entity formed by splitting up or reconstructing an existing business is not eligible. Apply on the Startup India portal with the incorporation certificate and a description of the innovation.
Benefits of recognition include self-certification under some labour and environment laws, cheaper and faster patent and trademark filing, relaxed conditions in government tenders, access to the Fund of Funds, and simpler winding up.
Section 80-IAC tax holiday (now section 140)
| Condition | Requirement |
|---|---|
| Entity | Recognised startup that is a company or LLP |
| Incorporated | On or after 1 April 2016 and before 1 April 2030 |
| Turnover | Not above ₹100 crore in the year of claim |
| Approval | Certificate from the Inter-Ministerial Board (IMB), applied for through the Startup India portal |
| Benefit | 100% of profits for any 3 consecutive years out of the first 10 years |
A company claiming the deduction under section 80-IAC (now section 140) stays under the normal tax regime, where minimum alternate tax may still apply; the concessional company rate of 22% (section 115BAA, now section 200) does not allow this deduction. Plan which three years to claim; they should be years of profit.
Other tax relief for startups
- Losses: an eligible startup can carry forward losses despite a change in shareholding, if all the original shareholders continue to hold shares.
- ESOPs: employees of eligible startups can defer the tax on ESOP perquisites.
- Angel tax: the tax on share premium above fair value (section 56(2)(viib) of the 1961 Act) was abolished from tax year 2024-25 and has no counterpart in the 2025 Act.
Legal basis
- DPIIT notification G.S.R. 108(E), 4 February 2026 (startup recognition)
- Section 80-IAC, Income-tax Act, 1961, now section 140, Income-tax Act, 2025
Official sources
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