Section 80-IAC of the Income Tax Act presents a valuable opportunity for eligible startups to benefit from profit-linked tax holidays. These tax holidays provide a window of exemption for any three consecutive years within the first ten years from the year of their incorporation. To avail this benefit, startups must be recognized by the Department for Promotion of Industry and Internal Trade (DPIIT), underscoring the significance of DPIIT approval and recognition in claiming tax exemption.
This provision applies to startups that have been incorporated on or after April 1, 2016, ensuring that relatively newer entities can avail themselves of the tax benefits. According to Section 80-IAC, eligible assessee startups that generate profits can claim 100% tax deductions for three consecutive years. It is crucial to note that startups claiming the 80-IAC tax exemption must be original entities, not formed as a result of a split or reconstruction of an existing business.
