Startup tax holiday under section 140 of the Income-tax Act 2025
Eligible startups can deduct 100% of profits for 3 consecutive years out of 10 under section 140 (formerly 80-IAC) if incorporated before April 2030.
Short answer
The startup tax holiday lets an eligible startup deduct 100% of its profits from an eligible business for any three consecutive years out of its first ten years. Under the Income-tax Act, 2025 it is in section 140, formerly section 80-IAC. The startup must be incorporated before 1 April 2030 and hold a certificate from the Inter-Ministerial Board.
- Provision
- Section 140, Income-tax Act 2025 (formerly 80-IAC)
- Benefit
- 100% of eligible profits for 3 consecutive years out of 10
- Incorporation window
- 1 April 2016 to 31 March 2030
- Certification
- Inter-Ministerial Board (IMB)
Who is eligible
The benefit is available to companies and LLPs recognised as startups that obtain a certificate from the Inter-Ministerial Board, which assesses whether the business is innovative and technology or IP driven. Turnover must not exceed ₹100 crore in the relevant years, as set in the tax provision. The business must not be formed by splitting up or reconstructing an existing business, and previously used plant and machinery is capped at 20% of the total. Partnership firms and proprietorships are not eligible.
How the deduction works
The startup chooses which three consecutive tax years within the ten-year block to claim, usually the first profitable ones. The deduction reduces normal taxable income, but companies under the regular regime may still pay minimum alternate tax on book profits, which Budget 2026 made a final tax at 14%. The deduction is not available to companies that opt for the 22% concessional rate under section 200.
Why it matters for startups
Few startups are profitable early, so the real value is in timing the three years well. Apply for IMB certification on the Startup India portal once you have DPIIT recognition, keep clear records of eligible business income, and model the interaction with MAT and the 22% option before choosing your years.
Related services
Sources
- IncorpX: Section 140 of the Income-tax Act 2025 (startup tax holiday)
- Startup India portal (DPIIT)
- EZTax: Income-tax Act 1961 vs 2025 section mapping
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is DPIIT recognition enough for the tax holiday?
No. The startup also needs a certificate from the Inter-Ministerial Board, which applies a stricter innovation test.
Can an LLP claim the startup tax holiday?
Yes. Eligible LLPs and companies can claim it, subject to the conditions.
Until when must a startup be incorporated to qualify?
Before 1 April 2030, following the extension made in Budget 2025.