Section 80-IAC

TL;DR

India's tax holiday for DPIIT-recognised startups: 100% deduction of profits for any 3 consecutive years of the first 10 from incorporation, board-approved.

Section 80-IAC of India's Income Tax Act provides a 100% income-tax deduction on profits and gains for any three consecutive financial years out of the first ten years from incorporation, for DPIIT-recognised startups whose annual turnover does not exceed ₹100 Cr in the relevant year. The startup must apply separately to the Inter-Ministerial Board (IMB), which approves a small fraction of applications based on innovation, scalability, employment-generation, and wealth-creation criteria.

For Indian founders, 80-IAC is one of the most valuable but least frequently granted tax incentives — IMB approval rates have historically run sub-10%. Successful applicants typically defer the three-year window to the years when they expect peak profitability, maximising the absolute tax saving. Founders without IMB approval can still benefit from 'angel tax' relief and patent fee discounts via DPIIT recognition alone.

Formula

Tax Holiday Saving = Profit × Effective CT Rate (claim 3 of first 10 FYs)

• Profit — Taxable profit during a chosen year of the three-year window
• Effective CT Rate — ~25.17% headline corporate-tax rate for Indian companies under the new regime

Sub-bar turnover (≤₹100 Cr) is required in each chosen year; founders typically defer the window to peak-profitability years.

Worked example

A Bangalore SaaS DPIIT-recognised + IMB-approved startup chooses FY26, 27, 28 as its 80-IAC window. Combined profit across those three years is ₹40 Cr; 80-IAC defers ~₹10 Cr (~$1.2M) of corporate tax — meaningful runway for a Series-B-stage Indian SaaS.

Common pitfalls

• Confusing DPIIT recognition (broad, easy) with 80-IAC IMB approval (narrow, hard) — only the latter unlocks the tax holiday.
• Triggering the three-year window during a loss-making year and wasting the deduction.
• Outgrowing the ₹100 Cr turnover bar in the chosen years and losing the deduction retroactively.

When this shows up in a pitch deck

Indian Series B decks list '80-IAC IMB-approved — chose FY27/28/29 as the three-year tax-holiday window' on the financial-projections slide.

Related terms

• DPIIT-Recognised Startup — Indian government recognition (Startup India) for under-10-yr-old, sub-₹100 Cr-revenue innovative companies — unlocks tax holidays and angel-tax exemption.
• ESOP under Companies Act 2013 (India) — Indian employee stock-option scheme under §62(1)(b) of the Companies Act 2013 — granted to employees and directors (excluding promoters), 1-yr vesting cliff.
• AIF Category I/II — India's SEBI-registered VC/PE fund vehicles: Category I (VC, SME, social, infra) and Category II (PE/debt), with pass-through tax and ₹1 Cr LP minimum.
• CIR (Crédit d'Impôt Recherche) — France's research tax credit: 30% refundable credit on the first €100M of qualifying R&D spend per year, paid as cash to loss-making startups.
• SR&ED — Canada's flagship federal R&D tax credit: 35% refundable for CCPCs (first C$3M of spend), 15% non-refundable otherwise. Often the largest non-dilutive line.

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