We are a start-up. Can we take the 100 per cent deduction under s.80-IAC, and what has to be in place before we claim it?
It depends on four things, and the certificate is what stops most claims. s.80-IAC gives a deduction of 100 per cent of the profits and gains derived from the eligible business for three consecutive assessment years, which the assessee may pick out of the ten years from incorporation. The entity must be a company or an LLP incorporated on or after 1 April 2016 but before 1 April 2030, with total turnover not exceeding Rs 100 crore in the previous year relevant to the year of claim, holding a certificate of eligible business from the Inter-Ministerial Board of Certification. It sits under heading C of Chapter VI-A, so the s.80AC due-date condition applies, and a company that has opted into s.115BAA or s.115BAB cannot claim it at all.
s.80-IAC(1) provides that where the gross total income of an assessee, being an eligible start-up, includes any profits and gains derived from eligible business, there shall be allowed "a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years". s.80-IAC(2) adds that the deduction "may, at the option of the assessee, be claimed by him for any three consecutive assessment years out of ten years beginning from the year in which the eligible start-up is incorporated". So the holiday is three years long, not ten; the ten years are only the window inside which the three must fall, and the three must be consecutive. There is no reason to burn them on loss years, and no mechanism in the section for splitting them up once started.
Which text this page works from. The window has been extended more than once, so the date matters more than anything else here. The departmental page for s.80-IAC carries the footnote "Substituted for '2025' by Act No. 7 of 2025, w.e.f. 1-4-2025" against the incorporation date, and the operative words now read that the start-up "is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2030". Act No. 7 of 2025 is the Finance Act, 2025; a substitution with effect from 1 April 2025 operates for assessment year 2025-26 onwards. The department's own Key Highlights of the Finance Act 2025 puts it in the same terms: "The benefit of the exemption under Section 80-IAC is extended for an additional five years, making it available to eligible start-ups incorporated before 01-04-2030." A start-up incorporated on or after 1 April 2030 is outside the section however good its case otherwise.
Who qualifies. The Explanation to the section defines "eligible start-up" as "a company or a limited liability partnership engaged in eligible business" which is incorporated in that window, whose "total turnover of its business does not exceed one hundred crore rupees in the previous year relevant to the assessment year for which deduction under sub-section (1) is claimed", and which "holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government". A firm, a proprietorship or an AOP is outside it: only a company or an LLP within the meaning of s.2(1)(n) of the Limited Liability Partnership Act, 2008 can claim. "Eligible business" is "a business carried out by an eligible start-up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation".
The turnover cap is tested year by year, not once. The words are "in the previous year relevant to the assessment year for which deduction under sub-section (1) is claimed". So a start-up that was at Rs 40 crore when it was certified and is at Rs 120 crore in the year it claims does not answer the definition for that year. Because the three years must be consecutive, a business growing fast has to choose its three years against a cap it may cross in the middle of them.
The certificate. The statutory condition is a certificate of eligible business from the Inter-Ministerial Board of Certification. In practice the route runs through recognition by the Department for Promotion of Industry and Internal Trade first and an application to the Board after that; the section itself says nothing about recognition, only about the Board's certificate, and nothing about when the certificate must be obtained relative to the year claimed. The Startup India pages that set out the application process and the time it takes could not be opened, so no timeline is stated here - see gaps.
The s.80-IAC(3) conditions. The start-up must not be "formed by splitting up, or the reconstruction, of a business already in existence", subject to a proviso that saves a start-up formed by re-establishment, reconstruction or revival of an undertaking referred to in s.33B, in the circumstances and within the period specified in that section. It must not be "formed by the transfer to a new business of machinery or plant previously used for any purpose". Both relaxations a practitioner reaches for are in s.80-IAC(3) itself, not borrowed from s.80-IA(3). Explanation 1 takes imported machinery out of the bar where three conditions are met cumulatively - it was not at any time previously used in India, it is imported into India, and no depreciation on it has been allowed or is allowable to any person for any period before its installation by the assessee. Explanation 2 is the twenty per cent test: where previously used machinery or plant is transferred to the new business and "the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business", the condition is deemed complied with. Note what the twenty per cent is measured against - the total value of machinery and plant used in the business, not the total assets and not turnover.
What comes in through s.80-IAC(4). "The provisions of sub-section (5) and sub-sections (7) to (11) of section 80-IA shall apply to the start-ups for the purpose of allowing deductions under sub-section (1)." That imports the separate-source fiction in s.80-IA(5), under which the eligible business is treated as the only source of income for the purpose of computing the deduction; the audit requirement in s.80-IA(7), under which the deduction is not admissible unless the accounts have been audited by an accountant and the report furnished in the prescribed form; and s.80-IA(8) and s.80-IA(10), which let the Assessing Officer restate inter-unit transfers at market value and cut back profits that are more than the ordinary profits of the eligible business because of a close connection or an arranged course of business. Transactions caught by s.80-IA(8) and s.80-IA(10) are the subject of the corpus page on specified domestic transactions. On the form, the department's own page describing Form 10CCB names s.80-IA, s.80-IB and s.80-IC and does not name s.80-IAC; the statutory requirement is the report in the prescribed form, and the form actually to be filed should be checked on the e-filing utility for the year - see gaps.
The s.80AC due-date condition. s.80-IAC sits in Chapter VI-A under the heading "C.-Deductions in respect of certain incomes". Do not try to show that from s.115BAA or s.115BAB, which stopped referring to the heading in 2020 - see the next paragraph. The support is positional and it is on the Finance Bill 2016: clause 41 inserted the section "After section 80-IAB of the Income-tax Act", inside the heading C block, and the commentary enumerating the deductions s.80AC now catches lists "Section 80IAC : Special provision in respect of specified business" among them. The current s.80AC was substituted by clause 23 of the Finance Bill 2018 with effect from 1 April 2018, and it provides that where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after "(ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading 'C.-Deductions in respect of certain incomes', no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139". The corpus page on s.80AC sets out how hard that condition has been applied and the s.119(2)(b) route out of it. A caution on sourcing: the departmental page for s.80AC serves superseded text, listing only s.80-IA, s.80-IAB, s.80-IB, s.80-IC, s.80-ID and s.80-IE and carrying footnotes stopping at the Finance Act 2007. Do not work from it; work from the substituted section quoted above.
The regime choice. A company that has exercised the option under s.115BAA (22 per cent) or s.115BAB (15 per cent for new manufacturing) computes its income without a Chapter VI-A deduction, and the words most material still quotes for that are five assessment years out of date. Footnote 78 on the departmental s.115BAA page and footnote 79 on the s.115BAB page each read: "Words 'Chapter VI-A other than the provisions of section 80JJAA or section 80M' shall be sub. for 'Chapter VI-A under the heading \"C.-Deductions in respect of certain incomes\" other than the provisions of section 80JJAA' by the Act No. 12 of 2020, w.e.f. 1-4-2021". From assessment year 2021-22 the denial is therefore wider, not narrower - it reaches the whole of Chapter VI-A - and only s.80JJAA and s.80M are preserved. s.80-IAC is not saved on either wording, so the conclusion is unchanged and in fact stronger. So a certified start-up company that is going to be profitable in its holiday years is choosing between a flat concessional rate on all its income and the ordinary rate with three years at nil. The comparison is arithmetic and has to be done on projections for the whole ten-year window, not for the current year, because the option under s.115BAA once exercised cannot be withdrawn. The corpus page on the concessional regimes, and the entry on Sarla Holdings, deal with the mechanics and the timing of the option itself. Note also that s.115BAC is a regime for individuals and Hindu undivided families and does not reach a company or an LLP in any event. It is cited here only for that class of persons, and the departmental page it is cited from is itself stale: it serves the section as inserted by the Finance Act 2020 with effect from 1 April 2021, with no sub-section (1A), no reference to s.80CCH and the text ending at sub-section (5). Do not take from that page which deductions the regime now preserves.
MAT and AMT. The s.80-IAC deduction is a deduction in computing total income. It does not touch book profit, so a start-up company outside s.115BAA remains within s.115JB on its book profit for the very years its normal tax is nil, and the tax it pays becomes credit under s.115JAA - the corpus page on MAT credit deals with the fifteen-year carry forward and the set-off ceiling. No MAT rate is stated here because the departmental page for s.115JB serves the 2001 text (it still reads "seven and one-half per cent"). For an LLP, the equivalent is the alternate minimum tax: on the department's MAT and AMT page, "In case of a non-corporate taxpayer, AMT is levied @ 18.5%* of adjusted total income", it applies to a non-corporate taxpayer who has claimed the relevant deductions, and "the AMT credit can be carried forward only for a period of 15 tax years after which it will lapse". That page has been rewritten to the numbering of the Income-tax Act, 2025 and now speaks of "deduction under Chapter VIII-C" rather than Chapter VI-A heading C; the Rs 20,00,000 adjusted-total-income floor it states is for an individual, HUF, AOP, BOI or artificial juridical person and does not save an LLP.
The Income-tax Act, 2025. The department's own navigator between the two Acts maps "80-IAC Special provision in respect of specified business" to section 140 of the new Act. s.140 carries the same scheme forward - 100 per cent of the profits and gains for three consecutive tax years, claimable "for any three consecutive tax years out of ten years beginning from the year in which the eligible start-up is incorporated", for a company or LLP "incorporated on or after the 1st April, 2016 but before the 1st April, 2030", with turnover not exceeding one hundred crore rupees and a certificate from the Inter-Ministerial Board of Certification. The 2025 Act takes effect from 1 April 2026.
One practical link. The right to defer deduction of tax on an ESOP perquisite under s.192(1C) is keyed to being an eligible start-up referred to in s.80-IAC. The corpus page on the ESOP perquisite and the s.192(1C) deferral sets that out; a start-up that has not got the Board's certificate loses the deferral as well as the deduction.
The three-year holiday is the only part of the start-up tax package that turns on a certificate from a body outside the income-tax department, and it is the part most often claimed without one. The deduction is also all-or-nothing on two fronts that have nothing to do with the merits: a return filed one day after the s.139(1) due date takes it away under s.80AC, and a company that has already opted into s.115BAA or s.115BAB cannot take it at all. The turnover cap being tested in the year of claim, rather than once at the start, means the three consecutive years have to be chosen against a projection rather than a history.
When I reduce export profits from book profit under section 115JB, do I take the full section 80HHC(3) figure or only the 80 per cent the phase-out allows?
My section 80-IA deduction is larger than my business income. Can I set it against my other income too, or only against business income?
The Assessing Officer computed interest under s.234B and s.234C first and only then gave me credit for MAT under s.115JAA. My refund has turned into a demand. Is that the right order?
My company paid no advance tax because we only knew we would fall under MAT once the accounts were audited — is interest under sections 234B and 234C still chargeable on the tax on book profit?
I did not tick s.115BAA in the return and filed Form 10-IC late. Can I still get the concessional rate?
CPC made a section 143(1)(a) adjustment without first putting the proposed adjustment to me. The department says my reply could not have changed anything. Does that save the intimation?
Our co-operative credit society filed its return late and lost the section 80P deduction under section 80AC. The Chief Commissioner has rejected our section 119(2)(b) condonation application for want of sufficient cause. Is that rejection sustainable?
I opted for the 22 per cent rate in my return but missed filing Form 10-IC by the due date. The Commissioner refused to condone the delay. Can the High Court help?
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