80IAC (Tax Deduction Eligibility Certificate)

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 

File 80IAC Application at only Rs. 2499/-

Form 80IAC (Tax Deduction Eligibility Certificate): Objective

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.

80IAC (Tax Deduction Eligibility Certificate)

Eligibility Criteria for 80IAC Certificate

1. Startup Recognition

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.

2. Business Nature

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.

3. Year of Incorporation

The startup should have been incorporated after April 1, 2016, but before April 1, 2023, to be eligible for the 80IAC certificate.

4. Nature of Business Entity

Only Private Limited Companies or Limited Liability Partnerships are eligible for tax exemption under Section 80IAC

Documents Required for Form 80IAC (Tax Deduction Eligibility Certificate)

  1. Memorandum of association (for Pvt Ltd) or LLP Deed (for LLP)
  2. Startup India Recognition Certificate/ DIPP Registration Certificate
  3. Board Resolution (if any)
  4. Annual Accounts & Income Tax returns of the startup for the last three financial years.

    Toolkit for Financial Statements

    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. Startup Video Link.

    Toolkit for Video Link

    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. Pitch deck.

    Toolkit for Pitch deck

    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

Benefits of 80IAC (Tax Deduction Eligibility Certificate)

1. Tax Deduction

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.

2. Encourages Innovation

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.

3. Boosts Investment

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.

4. Competitive Advantage

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.

Frequently Asked Questions (FAQs)

How can a startup apply for the 80IAC certificate?

To apply for the 80IAC certificate, startups need to follow these steps:

  • Obtain recognition from DPIIT as a startup.
  • Prepare the necessary documents, including the application form, business plan, and financial statements.
  • Submit the application to the Inter-Ministerial Board (IMB) for evaluation.
  • If approved, the startup will receive the 80IAC certificate.
Can a startup claim tax benefits for more than three years?

No, the 80IAC certificate allows startups to claim a tax deduction for a consecutive period of three out of ten years, starting from the year of incorporation.

Are there any restrictions on the utilization of the tax deduction?

Startups can utilize the tax deduction provided by the 80IAC certificate only against their profits. The deduction cannot be claimed against any other income.

Is the 80IAC certificate applicable to all types of startups?

No, the 80IAC certificate is applicable to startups engaged in eligible businesses, as defined by DPIIT. The startup should also meet the other eligibility criteria mentioned earlier.

Can startups claim the tax deduction retroactively?

No, startups can claim the tax deduction only from the year of incorporation or the subsequent years, as per the eligibility criteria.

What happens if a startup fails to meet the eligibility criteria after receiving the 80IAC certificate?

If a startup fails to meet the eligibility criteria during the three-year period, it will lose the tax benefits provided by the 80IAC certificate for the respective years.