Over 180 Start-Ups Will Get 100% Income Tax Exemption – What's This 80-IAC Scheme All About?

The Department for Promotion of Industry and Internal Trade (DPIIT) has approved 187 start-ups for income tax exemption under the revamped Section 80-IAC of the Income Tax Act, the government said in an official statement. The decision was taken during the 80the meeting of the Inter-Ministerial Board (IMB) that took place on April 30, 2025.

The eligible start-ups will now have 100% income tax deduction on profits for any three consecutive years within a ten-year window from the date of incorporation, the DPIIT spokesperson said. The central government has designed this scheme to support new-age businesses in their formative years, which will encourage innovation, job creation, and wealth generation.

Start-ups that were not approved in the recent round have been asked to refine their applications. The DPIIT has advised applicants to focus on demonstrating technological innovation, market potential, scalability, and a clear contribution to employment and economic growth. With the latest approvals, as many as 3,700 start-ups have been granted income tax exemptions since the scheme’s inception.

This came after Union Finance Minister Nirmala Sitharaman, in budget 2025-26, proposed a five-year extension to the eligibility window for start-ups seeking tax benefits under Section 80-IAC. Under the new proposal, start-ups incorporated before April 1, 2030, would qualify for these incentives.

“The revised evaluation framework introduced by DPIIT has made the application process more structured and transparent. Complete applications are now reviewed within 120 days, ensuring faster decision-making and reducing procedural delays,” the statement read.

Tax Exemption Scheme for Start-Ups

The central government introduced Section 80-IAC on April 1, 2017 for start-ups. It allows new-age businesses to avail a 100% income tax deduction on profits for the given timeline. The rule is designed to ease the tax burden on start-ups, allowing them to invest that amount into expanding their operations.

However, it’s not an easy-peasy process to avail the benefits; there are a slew of mandates. The applicant needs to be DPIIT-registered, “work towards innovation”, and hold a turnover of less than Rs 100 crore. Still, only 3,700 start-ups have been granted tax exemptions, out of total 1.6 lakh ventures registered with DPIIT.

This mirrors concerns raised by a Parliamentary panel in 2023. Back then, the Parliamentary Standing Committee on Commerce highlighted that out of 98,119 registered startups, only 10,165 had applied for tax benefits under section 80-IAC.

The panel urged the government to ease the eligibility criteria under the income tax law, pointing out that just 1% of recognised start-ups had received eligibility certificates. It also flagged several issues with the application process, including a lack of clarity and a cumbersome user interface, which contributed to the under-utilisation of the tax benefit provision.