Sec 80IAC & Its Impact on Startups



What is Section 80IAC?


The Government of India has taken the initiative of Startup India to enhance the startup environment in the country. The major purpose of the same is to make an environment facilitative to the growth and development of startups in India. As per Section 80IAC of the income tax act, it furnishes tax incentives for startups. The major key component of the program is that it furnishes tax benefits to the qualified startups for their initial three years of procedure under section 80IAC.

Under the benefits, it gives a 100% tax exemption on the incurred profits that the startup made in its initial three years of operation given that the startup fulfills the criteria as mentioned. It is essential for the startup to get registered as a private limited company so as to meet the eligibility criteria for the exemptions of taxes, also it should raise the funding of at least Rs.25 lakhs in the initial five years of its functioning.

Indeed it is vital for the startup to get engaged in the new product or service development and holds a turnover of less than Rs 25 cr. Section 80IAC of the Income Tax Act has had a significant impact on startups. Tax incentives have boosted the Indian startup ecosystem to a great extent.

It is now possible for startups to invest more money into their operations, allowing them to develop new products and services. The government has also encouraged investors to invest in startups by providing tax incentives. This has led to a rise in venture capital investments in startups, which has provided much-needed capital to them.

Section 80IAC, which was enacted under the Income Tax Act, has generally had a positive effect on startups. In India, it has furnished a required boost to the startup ecosystem and would motivate investors to invest in the startups.


Deduction under Section 80IAC:

Section 80-IAC of the Income Tax Act of India allows for 100% deduction of profits and gains from an eligible business for a period of 10 consecutive assessment years. This deduction is available to eligible start-ups that are incorporated on or after 1st April 2016 and are engaged in the eligible business.

To claim the deduction under Section 80-IAC, the start-up must fulfill the following conditions:

  1. It must be incorporated on or after April 1st, 2016.
  2. Its turnover must not exceed Rs. 100 crores in any of the financial years during the period of 10 consecutive assessment years from the year in which the business begins.
  3. The start-up should be engaged in an eligible business that includes innovation, development, or improvement of products or processes, or services or scalability of such business with a high potential of employment generation or wealth creation.
  4. The start-up should be certified by the Inter-Ministerial Board of Certification as an eligible start-up and this certification should be valid on the date of filing of the return of income.
  5. The start-up should file a declaration in Form 10-IAC in the prescribed format before the due date of filing of return of income.

It’s important to note that the deduction under Section 80-IAC is available only to the eligible start-up and not to the partners or shareholders of the start-up.


Process of Obtaining Certificate for Section 80IAC:

To claim the 100% deduction of profits and gains under Section 80-IAC of the Income Tax Act of India, a start-up must first obtain a certificate of eligibility from the Inter-Ministerial Board of Certification (IMB). The certificate process is as follows:

  1. Eligibility criteria: The start-up should meet the eligibility criteria as specified in Section 80-IAC of the Income Tax Act, such as being incorporated on or after April 1st, 2016, having a turnover not exceeding Rs. 100 crores, and being engaged in an eligible business.
  2. Application: The start-up should apply for the certificate of eligibility on the official website of the Department for Promotion of Industry and Internal Trade (DPIIT). The application should be made in the prescribed form and should be accompanied by the required documents.
  3. Screening: The application is screened by the DPIIT officials to ensure that the start-up meets the eligibility criteria.
  4. Assessment: The DPIIT officials conduct an assessment of the start-up to determine if it has a high potential for employment generation or wealth creation.
  5. Approval: If the start-up is found to be eligible, the DPIIT officials approve the application and issue the certificate of eligibility.
  6. Validity: The certificate of eligibility is valid for a period of 12 months from the date of issue.

It’s important to note that the start-up should file a declaration in Form 10-IAC in the prescribed format before the due date of filing of return of income


Revocation process for Section 80-IAC:

The revocation process for the certificate of eligibility under Section 80-IAC of the Income Tax Act of India is as follows:

  1. Grounds for revocation: The Inter-Ministerial Board of Certification (IMB) can revoke the certificate of eligibility if it finds that the start-up no longer meets the eligibility criteria, such as having a turnover exceeding Rs. 100 crores, or if the start-up has made false statements or misrepresentations in its application.
  2. Show Cause Notice: The IMB will issue a show cause notice to the start-up, asking for an explanation for why the certificate should not be revoked. The start-up should respond to the notice within the time specified in the notice.
  3. Hearing: The IMB may conduct a hearing to consider the start-up’s response to the show cause notice. The start-up should be given an opportunity to present its case and provide evidence to support its position.
  4. Decision: After considering the start-up’s response and conducting a hearing, if necessary, the IMB will make a decision on whether to revoke the certificate of eligibility.
  5. Appeal: The start-up can appeal the decision of the IMB to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) within 30 days of the decision.

It’s important to note that the revocation of the certificate of eligibility under Section 80-IAC will result in the start-up being ineligible to claim the 100% deduction of profits and gains for the relevant assessment year.

Don't forget to share this article :-

Stay Updated With Our Blogs!

Explore more of our blogs to have better clarity and understanding
of the latest corporate & business updates.

Why People Choose Our Services ?

Free Legal Advice

We provide free of cost consultation and legal advice to our clients.

Tech Driven Platform

All our services are online no need you to travel from your place to get our services.

Grow your business

Experts Team

We are a team of more than 15+ professionals with 11 years of experience.

Transparent pricing

There are no hidden & extra charges* other than the quote/invoice we provide.

100 % Client Satisfaction

We aim that all our customers are fully satisfied with our services.

On-Time Delivery

We value your time and we promise all our services are delivered on time.

Why Trust legal Suvidha?

People Who loved our services and what they feel.

In this Journey of the past 10+ years, we had gained the trust of many startups, businesses, and professionals in India and stand with a 4.9/5 rating in google reviews.We register business online and save time & paperwork.

Reno K Subramaniam
Reno K Subramaniam
I have recently registered a Private Limited firm and was looking for a CA to take care of the filings, Startup India Certificate, and other formalities. I have received emails from legal Suvidha and a few others. I tried talking to them all. But, Mr. Mayank from Legal Suvidha was very impressive and was patient enough, prompt to answer all the queries. He has a very professional team and after the initial formalities, I started interacting with the team. It's not even 2 weeks but I really feel overwhelmed by their service and professionalism. I received my startup India certificate yesterday and my filings have been done promptly. The team at legal suvidha Ms. Nidhi, Ms. Priyanka, Ms. Koshika, and Ms. Saloni all show the same professionalism and are readily available to take care of the official filings and stuff. Overall a great experience till now and looking forward to a great journey!
pankaj tiwari
pankaj tiwari
Legal suvidha is a team of genuine and experienced professionals who give you best services according to your profile
Raman Krishnan
Raman Krishnan
Saloni from legalsuvidha has done a excellent job for filling and geting certificate of DPIIT. Thanks to legalsuvidha.
Prakaash Hari
Prakaash Hari
Team Legal Suvidha offers a brilliant service. There communication is quite clear and they execute the job meticulously. We are a startup private limited company and their advice is so critical in making my decision. Well done team. Keep it up. Prakaash Hari, Director, ipixela.
Priyanka Rudra
Priyanka Rudra
Dedicated team and fast response
Dr. Vishal Ghag
Dr. Vishal Ghag
Been using their services since 3 years now and I am absolutely happy with Legal Suvidha. They have been supportive, understanding and highly skilled at helping me with my business needs.

Our Partnerships & Collaborations

Contact us and grow your business

Legal Suvidha App

Now all Professional Services in a Single Click !

Now get all the services required for your business in a single app.

Subscribe to our newsletter & grow your business

Subscribe To Our Newsletter .

Sign up to receive email updates on new product announcements, special promotions, sales & more.