Launching a startup in India in 2025? You’re stepping into one of the world’s fastest-growing entrepreneurial landscapes. With over 100,000 startups officially recognized by DPIIT (Department for Promotion of Industry and Internal Trade), India is fostering innovation like never before. But beyond funding and scaling, strategic tax planning plays a key role in startup success.
In this guide, we’ll explore the most impactful income tax benefits available to startups in 2025—especially the flagship exemption under Section 80-IAC of the Income Tax Act. Whether you’re an early-stage founder, a finance professional, or a tax consultant, this article outlines everything you need to know about optimizing your startup’s tax efficiency.
Let’s Understand Section 80-IAC of the Income Tax Act
Section 80-IAC was introduced to provide a tax holiday for eligible startups in India, promoting entrepreneurship and rewarding innovation. This tax benefit is one of the most valuable tools for reducing the financial burden in a startup’s early years.
Key Provisions under Section 80-IAC for FY 2024-25 / AY 2025-26:
1. 100% tax exemption on profits for any three consecutive assessment years within the first ten years of incorporation.
2. Applicable only to DPIIT-recognized startups.
3. The startup must be incorporated between April 1, 2016, and March 31, 2025 (as per the extended deadline).
4. Only Private Limited Companies or Limited Liability Partnerships (LLPs) are eligible.
5. The startup’s annual turnover must remain below ₹100 crore in every financial year since incorporation.
6. The startup must be engaged in innovation, development, or improvement of products, services, or processes, or operate a scalable business model with potential for employment or wealth creation.
If you’re yet to register, begin with our step-by-step Company Incorporation Services.
Section 80-IAC in Action: A Practical Example
Suppose your DPIIT-recognised startup earns a net profit of ₹40 lakhs annually. Without the 80-IAC benefit, your tax liability could be around ₹10 lakhs per year. With the exemption, you can save up to ₹30 lakhs over three years—a significant boost to your working capital and growth momentum.
Procedure to Claim Deductions Under Section 80-IAC
To avail the exemption under Section 80-IAC, eligible startups need to follow a defined procedure:
1. Incorporate your startup as a Private Limited Company or an LLP
→ Need help? Explore our Startup Registration Services.
2. Obtain DPIIT Recognition
→ Apply through the Startup India platform with required documentation.
3. Apply to CBDT for 80-IAC Approval
→ File Form 1 along with necessary declarations and financials.
4. File Your ITR Properly (Form ITR-6)
→ Ensure audit compliance and accurate reporting of exempted income.
Need assistance with filings? Our Income Tax Return Filing Services cover it end to end.
Additional Tax Benefits for Startups in 2025
In addition to the flagship Section 80-IAC exemption, startups can also take advantage of several other valuable tax benefits and exemptions available under the Income Tax Act.
1. Capital Gains Exemption – Section 54GB
- Investors can avail exemption on long-term capital gains if the proceeds from the sale of a residential property are invested in an eligible startup.
- The startup must deploy these funds in plant and machinery or technology assets within a year.
Planning capital investment? Check our GST Registration & Compliance Services to stay fully compliant.
2. Angel Tax Relief – Section 56(2)(viib)
- Previously, startups faced taxes on receiving capital at a premium above fair market value.
- DPIIT-recognised startups are now exempt from angel tax, provided they meet prescribed conditions.
- From FY 2023-24, relief was also extended to non-resident investors, boosting FDI in Indian startups.
Raising funds internationally? Learn more about our NRI and Foreign Subsidiary Services.
3. Presumptive Taxation – Section 44ADA
- Applicable for startups offering professional services like consultancy, design, development, etc.
- If gross receipts are below ₹75 lakh, the startup can declare 50% of income as profit under presumptive taxation.
- Books of accounts are not mandatory, reducing compliance load.
4. Venture Capital Income Exemption – Section 10(23FB)
- Income of Venture Capital Funds (VCFs) and Venture Capital Companies (VCCs) from investments in eligible startups is tax-exempt.
- Encourages seed funding and early-stage support by reducing tax friction in VC-backed deals.
Startup Tax Compliance Checklist for FY 2024-25
Here’s a quick checklist to stay tax-compliant and avoid last-minute hurdles:
| Compliance Requirement | Status |
| DPIIT Certificate Valid & Updated | ✅ |
| Income Tax Return (ITR-6) Filed | ✅ |
| 80-IAC Approval Obtained | ✅ |
| Tax Audit Completed (if applicable) | ✅ |
| Angel Tax Relief Conditions Met | ✅ |
| No Pending TDS, GST, or ROC filings | ✅ |
Need comprehensive support? Our Accounting & Bookkeeping Services will keep your records clean and investor-ready.
Common Mistakes to Avoid
| Mistake | Consequence |
| Not applying for DPIIT recognition | Ineligible for 80-IAC |
| Using the wrong ITR form | Risk of notice or rejection |
| Failing to maintain audit trail | Disqualification from exemptions |
| Misreporting share valuation | Angel tax complications |
Final Thoughts: Save More, Grow Faster
India’s startup ecosystem in 2025 is not just about innovation—it’s also about intelligent tax strategy. From Section 80-IAC’s tax holiday to capital gains exemptions and angel tax relief, startups have access to powerful income tax benefits designed to fuel growth.
If you’re at any stage—incorporation, funding, or scaling—ensure your tax structure is optimized and compliant. Ready to file smart and grow faster?
Visit our Startup Services Page or Contact Us to speak with our expert advisors.