When it comes to tax deductions and benefits, every individual and business owner is keen on exploring legitimate ways to minimize their tax liability. One such avenue available to Indian taxpayers is the 80IAC (Tax Deduction Eligibility Certificate). This certificate allows eligible entities to claim tax deductions, encouraging investment in specified industries and fostering economic growth. Chat with our Expers for more detail
The 80IAC (Tax Deduction Eligibility Certificate) is a certificate provided to eligible startups in India, granting them tax benefits under Section 80IAC of the Income Tax Act, 1961. This provision allows eligible startups to claim a deduction of 100% of their profits for a Subsequent 3 year, subject to certain conditions.
To be eligible for the 80IAC certificate, a startup must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT), Government of India. The recognition can be obtained by fulfilling the criteria defined by DPIIT, which includes factors such as innovation, scalability, and potential for employment generation.
The startup should be engaged in an eligible business, which includes sectors such as technology, manufacturing, biotechnology, electronics, and renewable energy. The business should also have the objective of developing and commercializing new products, processes, or services driven by technology or intellectual property.
The startup should have been incorporated after April 1, 2016, but before April 1, 2023, to be eligible for the 80IAC certificate.
Only Private Limited Companies or Limited Liability Partnerships are eligible for tax exemption under Section 80IAC
Updated financial statements (Balance Sheet, Profit & Loss statement, Income Tax Returns) for the past three years or from the year of incorporation
Note 1 – The Balance Sheet and the Profit and Loss Statement must be CA Certified
Note 2 – If your startup was incorporated on 1st April 2021 or later, Income Tax Returns (ITR) is not mandatory. For startups incorporated earlier, ITR is mandatory
5.1) The video should ideally be of 2-3 minutes and be no longer than 5 minutes
5.2) Please showcase the working of the product(s)prototype/proof-of-concept developed by your startup
5.3) If you are a product or software based startup then showcasing a demonstration/prototype/walk-through of the product(s)/software product(s) developed by you is compulsory
5.4) If you provide software or technology services such as website development, application development, developing white-label software products for clients, then please showcase a demonstration/prototype/walk-through of the product(s) developed for your key clients
5.5) Please also showcase the market traction that your product/service has generated through either online customer reviews, client testimonials (video/text are acceptable), or any other similar appreciation/feedback received.
Note –
Please upload the video is uploaded on a third-party video hosting platform such as Youtube or Vimeo. In case you are uploading the video on Google Drive please make sure that it is NOT access restricted
6.1) Information about the product/service offering of your startup
6.2) Brief about how is your startup innovative and/or scalable (Uniqueness/USP of the startup that differentiates from its competitors in the market)
6.3) Director details and their educational qualification, professional experience, and formal role in the startup/current designation (if any)
6.4) Shareholding pattern as on the date of filling this application
6.5) Directors and Shareholders’ citizenship details
6.6) Team details – current role, education, and professional experience
6.7) Details about adherence to the specific government approvals required by the startups such as FSSAI registration, guidelines set by Bureau of Indian Standards
6.8) Revenue model i.e. details of how the startup generates revenue
6.9) Funding received from private investors or Angel/VC funds (Yes/No); if yes, please add names and details of the investors
If any support (monetary/non-monetary) is received from Central or State Government Ministries/Departments/PSUs/Incubators
6.10) Details of any public or private sector awards won by the startup
6.11) Number of people directly employed with your startup
6.12) Number of customers/clients – Paying customers/users with a copy of at least one Contract/Work-Order/MoU or the number PlayStore/AppleStore downloads in case of mobile applications along with a screenshot of the app listing on these platforms
6.13) Link to your startup’s website
6.14) Screenshots/images of your product/website
Note –
1. Please ensure that you provide all the following details in your pitchdeck.
2. Pitchdeck uploaded must be in a PDF format
Under the Startup India initiative, eligible companies can get recognised as Startups by DPIIT, in order to access a host of tax benefits, easier compliance, IPR fast-tracking & more
The primary benefit of the 80IAC certificate is the tax deduction it provides to eligible startups. Startups can claim a deduction of 100% of their profits for a consecutive period of three out of ten years, starting from the year of incorporation. This deduction significantly reduces the tax liability of startups, allowing them to invest more in growth and expansion.
By providing tax incentives, the 80IAC certificate encourages startups to focus on innovation and development of new products, processes, or services. This fosters an environment of creativity and entrepreneurship, leading to technological advancements and economic growth.
The availability of tax benefits through the 80IAC certificate makes startups an attractive option for investors. Investors are more inclined to invest in startups that have the potential to utilize the tax benefits effectively, leading to increased funding opportunities for startups in India.
Startups with the 80IAC certificate gain a competitive advantage in the market. The tax benefits enable them to offer competitive pricing and invest in research and development, giving them an edge over their competitors.
Section 80-IAC of the Income Tax Act, 1961, provides eligible startups with a 100% tax deduction on profits and gains for any three consecutive financial years within the first ten years of incorporation. This provision aims to encourage innovation and the growth of new businesses in India.
To qualify for benefits under Section 80-IAC, a startup must:
The approval process for tax exemption under Section 80-IAC typically takes between three to nine months. Applicants can track their application status through the Startup India portal.
Once approved, startups can claim a 100% deduction on their profits for any three consecutive financial years out of the first ten years from incorporation. This significantly reduces their tax liabilities, allowing more funds to be reinvested into business growth.
Startups formed by splitting up or reconstructing an existing business are not eligible for benefits under Section 80-IAC. Additionally, businesses that have been previously discontinued due to natural calamities may have specific exceptions.
