Section 80-IAC gives an eligible start-up a deduction of one hundred per cent of the profits and gains derived from its eligible business for three consecutive assessment years. The start-up chooses the three years out of the ten years beginning with the year of incorporation.
An "eligible start-up" is a company or limited liability partnership engaged in an eligible business that is incorporated on or after 1 April 2016 but before 1 April 2030, whose total turnover does not exceed one hundred crore rupees in the previous year relevant to the year of claim, and that holds a certificate of eligible business from the Inter-Ministerial Board of Certification. An "eligible business" is one engaged in innovation, development or improvement of products, processes or services, or a scalable business model with high potential for employment generation or wealth creation. The start-up must not be formed by splitting up or reconstruction of an existing business, or by transfer of used plant and machinery beyond a twenty per cent tolerance.
Operative consequences
Sub-sections (5) and (7) to (11) of s. 80-IA apply: computation as if the eligible business were the only source of income, audit report, market-value transfers and adjustment of excess profits.
Under s. 80AC, no deduction is allowed unless the return is furnished on or before the due date under s. 139(1).
For loss carry forward, the proviso to s. 79(1) relaxes the shareholding-change rule for an eligible start-up, for losses of the first ten years, if all original shareholders continue to hold their shares.
Under the default regime in s. 115BAC(1A), Chapter VI-A deductions other than s. 80CCD(2), s. 80CCH(2) and s. 80JJAA are not allowed (s. 115BAC(2)(i)).
Status
Operative and time-limited by the incorporation date. The Act's note records that "2030" was substituted for "2025" by Act No. 7 of 2025, w.e.f. 1-4-2025. The Finance Act, 2026 does not amend s. 80-IAC. The Finance Act, 2026 did amend s. 140 of the 2025 Act, substituting "three" for "one" in the turnover limit, w.e.f. 1-4-2026, so the 2025 Act limit is three hundred crore rupees.
The Income-tax Act, 1961 governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the corresponding provision is s. 140.
Case Laws & Commentary
SECTION 80-IAC — SPECIAL PROVISION IN RESPECT OF SPECIFIED BUSINESS (ELIGIBLE START-UPS)
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Special provision in respect of specified business.
Section 80-IAC allows an eligible start-up — a company or limited liability partnership incorporated within the qualifying window, holding a certificate of eligible business from the Inter-Ministerial Board, with turnover not exceeding the prescribed limit — a deduction of 100 per cent of the profits and gains derived from the eligible business for any three consecutive assessment years out of the first ten years (the assessee's choice), subject to the section 80-IA(5) and (7) to (11) machinery. The incorporation window has been progressively extended.
A. SECTION COMMENTARY
A.1 Structural position
Section 80-IAC is the start-up tax holiday — a 100-per-cent deduction for any three consecutive years out of the first ten, for an Inter-Ministerial-Board-certified eligible start-up. It is one of the live, policy-prominent deductions; its incorporation window was last extended by the Finance Act, 2025, and it is not amended by the Finance Act, 2026.
A.2 Provision taxonomy
A 100-per-cent, three-out-of-ten-years deduction for an eligible start-up (incorporation within the window, IMB certificate, turnover cap, eligible business), with the section 80-IA(5) and (7)-(11) machinery and the 'derived from' nexus.
A.3 Core doctrinal themes
The provision is recent and the case law is still developing; the operative questions are the eligibility conditions (incorporation window, IMB certification, turnover limit, and the new-undertaking / no-reconstruction conditions imported from section 80-IA) and the 'derived from' nexus. The dominant current development is legislative — the extension of the incorporation window.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 2016. The incorporation window was extended successively, a year at a time, to 31 March 2021, 2022, 2023, 2024 and 2025, and the deduction is now available for three consecutive years out of ten. The Finance Act, 2025 (Act No. 7 of 2025) further extended the incorporation window for an eligible start-up to 31 March 2030, w.e.f. 1 April 2025, giving an additional period in which start-ups may incorporate and qualify for the three-year tax holiday. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Confirm incorporation within the (now extended) window up to 31 March 2030, the IMB eligibility certificate and the turnover cap. (2) Choose the three consecutive holiday years within the first ten to maximise relief; carry-forward of start-up losses is also liberalised under section 79. (3) Apply the 'derived from' nexus and the section 80-IA(5) fiction. (4) File the return by the section 80AC due date — the window extension does not relax that condition. (5) Note that section 115BAC applies only to individuals and other non-corporate assessees, not to a company or limited liability partnership; a company opting for section 115BAA or 115BAB cannot claim the deduction (section 115BAA(2)(i), section 115BAB).
B. FA 2026 IMPACT NOTE
Section 80-IAC is NOT amended by the Finance Act, 2026. The incorporation window for an eligible start-up was extended to 31 March 2030 (from 31 March 2025) by the Finance Act, 2025 (Act No. 7 of 2025), w.e.f. 1 April 2025, so that start-ups incorporated up to that date may claim the 100-per-cent, three-out-of-ten-years deduction, subject to the existing conditions.
The extension does not relax the section 80AC due-date condition: an eligible start-up must still file its return on or before the section 139(1) due date to claim the deduction.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Eligibility and the imported section 80-IA principles
Statutory scheme and imported section 80-IA authorities (developing case law)
Facts: An IMB-certified start-up incorporated within the window claims the three-year holiday.
Issue: What governs eligibility and quantum where the provision is recent and directly litigated case law is limited.
Held: Eligibility turns on the statutory conditions (incorporation window — now to 31 March 2030 after the Finance Act, 2025 — IMB certificate, turnover cap, eligible business, and the no-reconstruction / used-machinery conditions imported from section 80-IA); quantum follows the 'derived from' nexus (Liberty India) and the section 80-IA(5) fiction (Velayudhaswamy).
Ratio: Section 80-IAC is governed by its own eligibility conditions read with the section 80-IA machinery and nexus jurisprudence.
Relevance: States the operative framework for a live, policy-prominent deduction and records the Finance Act, 2025 window extension; the section 80-IA authorities supply the interpretive principles pending section-specific case law.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. Digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR). Several deductions in this cluster are sunset for new undertakings but carry substantial pending litigation and remain the governing law for open assessments.
Function in the statutory architecture
Section 80-IAC gives an eligible start-up a deduction of one hundred per cent of the profits and gains derived from its eligible business for three consecutive assessment years. The start-up chooses the three years out of the ten years beginning with the year of incorporation.
An "eligible start-up" is a company or limited liability partnership engaged in an eligible business that is incorporated on or after 1 April 2016 but before 1 April 2030, whose total turnover does not exceed one hundred crore rupees in the previous year relevant to the year of claim, and that holds a certificate of eligible business from the Inter-Ministerial Board of Certification. An "eligible business" is one engaged in innovation, development or improvement of products, processes or services, or a scalable business model with high potential for employment generation or wealth creation. The start-up must not be formed by splitting up or reconstruction of an existing business, or by transfer of used plant and machinery beyond a twenty per cent tolerance.
Operative consequences
Status
Operative and time-limited by the incorporation date. The Act's note records that "2030" was substituted for "2025" by Act No. 7 of 2025, w.e.f. 1-4-2025. The Finance Act, 2026 does not amend s. 80-IAC. The Finance Act, 2026 did amend s. 140 of the 2025 Act, substituting "three" for "one" in the turnover limit, w.e.f. 1-4-2026, so the 2025 Act limit is three hundred crore rupees.
The Income-tax Act, 1961 governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the corresponding provision is s. 140.
Case Laws & Commentary
SECTION 80-IAC — SPECIAL PROVISION IN RESPECT OF SPECIFIED BUSINESS (ELIGIBLE START-UPS)
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Special provision in respect of specified business.
Section 80-IAC allows an eligible start-up — a company or limited liability partnership incorporated within the qualifying window, holding a certificate of eligible business from the Inter-Ministerial Board, with turnover not exceeding the prescribed limit — a deduction of 100 per cent of the profits and gains derived from the eligible business for any three consecutive assessment years out of the first ten years (the assessee's choice), subject to the section 80-IA(5) and (7) to (11) machinery. The incorporation window has been progressively extended.
A. SECTION COMMENTARY
A.1 Structural position
Section 80-IAC is the start-up tax holiday — a 100-per-cent deduction for any three consecutive years out of the first ten, for an Inter-Ministerial-Board-certified eligible start-up. It is one of the live, policy-prominent deductions; its incorporation window was last extended by the Finance Act, 2025, and it is not amended by the Finance Act, 2026.
A.2 Provision taxonomy
A 100-per-cent, three-out-of-ten-years deduction for an eligible start-up (incorporation within the window, IMB certificate, turnover cap, eligible business), with the section 80-IA(5) and (7)-(11) machinery and the 'derived from' nexus.
A.3 Core doctrinal themes
The provision is recent and the case law is still developing; the operative questions are the eligibility conditions (incorporation window, IMB certification, turnover limit, and the new-undertaking / no-reconstruction conditions imported from section 80-IA) and the 'derived from' nexus. The dominant current development is legislative — the extension of the incorporation window.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 2016. The incorporation window was extended successively, a year at a time, to 31 March 2021, 2022, 2023, 2024 and 2025, and the deduction is now available for three consecutive years out of ten. The Finance Act, 2025 (Act No. 7 of 2025) further extended the incorporation window for an eligible start-up to 31 March 2030, w.e.f. 1 April 2025, giving an additional period in which start-ups may incorporate and qualify for the three-year tax holiday. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Confirm incorporation within the (now extended) window up to 31 March 2030, the IMB eligibility certificate and the turnover cap. (2) Choose the three consecutive holiday years within the first ten to maximise relief; carry-forward of start-up losses is also liberalised under section 79. (3) Apply the 'derived from' nexus and the section 80-IA(5) fiction. (4) File the return by the section 80AC due date — the window extension does not relax that condition. (5) Note that section 115BAC applies only to individuals and other non-corporate assessees, not to a company or limited liability partnership; a company opting for section 115BAA or 115BAB cannot claim the deduction (section 115BAA(2)(i), section 115BAB).
B. FA 2026 IMPACT NOTE
Section 80-IAC is NOT amended by the Finance Act, 2026. The incorporation window for an eligible start-up was extended to 31 March 2030 (from 31 March 2025) by the Finance Act, 2025 (Act No. 7 of 2025), w.e.f. 1 April 2025, so that start-ups incorporated up to that date may claim the 100-per-cent, three-out-of-ten-years deduction, subject to the existing conditions.
The extension does not relax the section 80AC due-date condition: an eligible start-up must still file its return on or before the section 139(1) due date to claim the deduction.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Eligibility and the imported section 80-IA principles
Statutory scheme and imported section 80-IA authorities (developing case law)
Facts: An IMB-certified start-up incorporated within the window claims the three-year holiday.
Issue: What governs eligibility and quantum where the provision is recent and directly litigated case law is limited.
Held: Eligibility turns on the statutory conditions (incorporation window — now to 31 March 2030 after the Finance Act, 2025 — IMB certificate, turnover cap, eligible business, and the no-reconstruction / used-machinery conditions imported from section 80-IA); quantum follows the 'derived from' nexus (Liberty India) and the section 80-IA(5) fiction (Velayudhaswamy).
Ratio: Section 80-IAC is governed by its own eligibility conditions read with the section 80-IA machinery and nexus jurisprudence.
Relevance: States the operative framework for a live, policy-prominent deduction and records the Finance Act, 2025 window extension; the section 80-IA authorities supply the interpretive principles pending section-specific case law.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. Digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR). Several deductions in this cluster are sunset for new undertakings but carry substantial pending litigation and remain the governing law for open assessments.