DPIIT Approves 187 Startups for Tax Exemptions Under Section 80-IAC
The Department for Promotion of Industry and Internal Trade (DPIIT) has approved 187 startups for income tax exemptions under the updated Section 80-IAC of the Income Tax Act, aimed at boosting India’s innovation-driven startup ecosystem.
- According to the commerce ministry, 75 approvals were granted in the 79th Inter-Ministerial Board (IMB) meeting, and 112 startups were cleared in the 80th meeting.
- With these additions, the total number of startups granted tax exemptions has now crossed 3,700 since the scheme was launched.
Extension of Eligibility Window Announced in Budget 2025-26
In her Union Budget 2025-26 speech, Finance Minister Nirmala Sitharaman proposed a five-year extension to the eligibility period for startups seeking benefits under Section 80-IAC.
- Under the revised proposal, startups incorporated before April 1, 2030, will be eligible for tax exemptions.
- The move is expected to widen the access to financial incentives, especially for early-stage and scaling startups.
The commerce ministry also highlighted that a revised evaluation framework introduced by DPIIT has streamlined the process.
- Complete applications are now processed within 120 days, significantly reducing bureaucratic delays.
- The framework promotes transparency and consistency in decision-making, addressing past criticisms around opacity in approvals.
Emphasis on Innovation and Economic Contribution
Startups not approved in the recent round have been encouraged to revise and refine their applications.
- The DPIIT has advised applicants to demonstrate technological innovation, market potential, scalability, and job creation capacity.
- This aligns with the government’s broader goal of fostering high-impact entrepreneurship that contributes to economic growth and employment generation.
Understanding the Tax Exemption Framework
Section 80-IAC, introduced in April 2017, allows eligible startups to claim a 100% income tax deduction on profits for three consecutive years within a 10-year window from the date of incorporation.
- This tax relief is meant to help startups retain earnings, invest in growth, and reduce early-stage financial burdens.
- It is particularly beneficial for technology-driven startups navigating long gestation periods before profitability.
However, availing the benefit requires meeting multiple conditions:
- Startups must be DPIIT-recognised, must focus on innovation, and have an annual turnover below INR 100 Cr.
- Even with these qualifications, approvals are relatively rare and remain highly selective.
Low Approval Rate Reflects Structural Challenges
Despite over 1.6 Lakh startups registered with the DPIIT, only around 3,700 have secured tax exemptions, indicating a low success rate.
- This mirrors concerns raised by the Parliamentary Standing Committee on Commerce in 2023.
- At the time, the panel noted that out of 98,119 registered startups, only 10,165 had applied, and just 1% had received eligibility certificates.
The committee also pointed out several hurdles:
- A lack of clarity in eligibility norms and a non-intuitive application interface were cited as key reasons for under-utilisation.
- The panel recommended relaxing criteria and simplifying the application process to ensure more startups benefit from the scheme.
As the government looks to support startups through policy reform and financial incentives, improving accessibility and communication around tax benefits under Section 80-IAC remains critical for greater impact.
