Section 80-IAC: Tax Incentives For Startups

To initiate the event of startups in India and supply a competitive platform for businesses that are newly established to thrive amidst the aggressive business atmosphere, the govt. of India has introduced Section 80-IAC within the taxation Act. Section 80-IAC mentions that an eligible startup shall be allowed a deduction of an amount adequate to 100 percent of the profits and gains. To market job-creating entrepreneurs, this section was promulgated as a part of the Finance Act of 2016 and was later amended within the Finance Bill of 2018.

To avail of the deductions offered by this section, a startup should engage within the eligible business for 3 consecutive assessment years out of seven years (five years until the assessment year 2017-18) beginning from the year during which the qualified startup was incorporated. to supply a useful incentive for startups and aid their growth within the early phase of companies, a brand new referred to as Section 80-IAC has been introduced. Accordingly, a deduction of 100 percent of the profits and gains derived by an eligible startup from a certified business is allowed for any three consecutive assessment years among the five years b

Section 80-IAC: Tax Incentives For Startups

eginning from the actual year during which the eligible startup is incorporated.


The incentives mentioned during this section are available to an eligible startup that fulfills the subsequent conditions:


With effect from the assessment year 2018-2019, the benefit would be hospitable startups incorporated after the first of April, 2019 but before the first of April, 2021. Up to the assessment year 2017-2018, the benefit was available to startups incorporated between the first of April, 2016 and before the first of April, 2019.

Incorporation And Turnover

The benefit under the section shall be available exclusively upon fulfilment of the subsequent conditions:

  • If the business is incorporated as a financial obligation Partnership (LLP) or a corporation.
  • If the entire turnover of the business doesn’t exceed INR 20 Crores in any of the prior years beginning on or after the first of April, 2016 and ending on the 31st of March, 2021.

Taxpayers should note that the need for the turnover not exceeding INR 25 Crores would apply to seven previous years commencing from the date of incorporation. Further, turnover mustn’t exceed the prescribed limit of INR 25 Crores for the year that the startup claims the 100 percent deduction.

Nature Of The Business

Mercantilism is engaged in an eligible business that’s involved in innovation, improvement of products or development of processes or services, or a scalable business model with a high potential of employment generation or wealth creation, deployment or commercialization of recent products, processes, or services driven by technology or holding.

Structure Of The Incorporation

The startup shouldn’t be formed by splitting up, or the reconstructing, a business that’s already living. However, this condition shall not apply in respect of a startup that is made as a result of a re-establishment, reconstruction, revival, or reconstruction by the assesses of the business of any such undertaking as stated in Section 33B, within the circumstances and within the amount laid out in that section.

Plants And Machinery

The business shouldn’t be formed by a transfer to a replacement business of machinery or plant previously used for any purpose. However, any machinery which was used outside India by someone apart from the assesses shall not be thought to be machinery or plant utilized in prior for any purpose, if all the subsequent conditions are fulfilled, namely:

  • If the machinery or plant wasn’t, at any time before the date of the installation by the assesses, utilized in India.
  • If the machinery or plant is brought into India from another country.
  • No education on account of depreciation concerning such machinery or plant has been permitted or is allowable under the provisions under the taxation Act of 1961 in calculating the full income of any person for any period before the date of the installation of the machinery or plant by the assesses.

Further, wherein the case of a startup, any machinery or plant or any part thereof previously used for the aim is transferred to new business and therefore the total value of the machinery or plant or part. this could not exceed 20 percent of the overall cost of the machinery or plant employed in the business. Then, the condition specified that it mustn’t be formed by the transfer to a replacement business of plant and machinery used for any purpose shall be deemed to possess been compiled.


Section 80-IAC: Tax Incentives For Startups

The startup must have an Inter-Ministerial Board certificate of eligibility, which is published in the Indian Central Government’s Official Gazette:

  • Where “eligible business” means a business that involves innovation, deployment, development, or commercialization of recent products, services, or processes driven by technology or property.
  • Where “eligible startup” means an organization or a financial obligation partnership engaged in an eligible business that fulfills the subsequent conditions.
  • Where “limited liability partnership” means a partnership observed in clause (n) of sub-section (1) under Section 2 prescribed within the financial obligation Partnership Act of 2008 (6 of 2009).


Eligible Business Considered as Exclusive Source of Income

According to the Revenue Enhancement Act, the gains and profits of the eligible business shall be estimated as if they were the assessee’s sle source of income throughout the relevant preceding years when computing the deduction under this provision.