How to Apply for the Startup Tax Holiday: IMB Certificate and Section 140 of the Income-tax Act 2025
Startup tax holiday: 100% profit deduction for 3 of the first 10 years under section 140 of the Income-tax Act 2025 (old 80-IAC), with an IMB certificate.
Short answer
An eligible startup can deduct 100% of profits for any three consecutive years out of its first ten. The provision is now section 140 of the Income-tax Act 2025, replacing section 80-IAC. You need DPIIT recognition, then an Inter-Ministerial Board certificate applied for on the Startup India portal. The entity must be a company or LLP incorporated between 1 April 2016 and 31 March 2030.
- Provision
- Section 140, Income-tax Act 2025 (80-IAC of 1961 Act)
- Deduction
- 100% of eligible profits
- Period
- Any 3 consecutive years out of first 10
- Incorporation window
- 1 April 2016 to 31 March 2030
- Turnover limit
- ₹100 crore in the year of claim
- Certificate
- Inter-Ministerial Board (IMB)
Who is eligible?
The deduction is available to a private limited company or LLP that is a DPIIT-recognised startup, holds an IMB certificate of eligible business, and was incorporated on or after 1 April 2016 and before 1 April 2030, a window extended by the Finance Act 2025. Its turnover must not exceed ₹100 crore in the year for which the deduction is claimed. It must not be formed by splitting up or reconstructing an existing business, and previously used plant and machinery should not exceed 20% of the total.
- Private limited company or LLP
- DPIIT recognition
- IMB certificate of eligible business
- Incorporated 1 April 2016 to 31 March 2030
- Turnover up to ₹100 crore in the claim year
- Not formed by splitting or reconstruction
What changed with the Income-tax Act 2025?
The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026 and uses 'tax year' in place of previous year and assessment year. The startup deduction now sits in section 140. The core conditions, a three-year deduction within the first ten years, carry forward. For tax year 2025-26 and earlier, claims are made under section 80-IAC of the 1961 Act. Check the prescribed audit report form for the year you claim, because form numbers have changed.
How to apply for the IMB certificate
The Inter-Ministerial Board examines whether the business is innovative and eligible. Apply online on the Startup India portal after receiving DPIIT recognition. The Board may ask for more information or a presentation. A clear explanation of the technology or innovation, backed by financials and evidence of IP or traction, improves the chances of approval.
- DPIIT recognition certificate
- MoA/AoA or LLP agreement
- Audited financial statements and income tax returns for available years
- Description of innovation, technology and revenue model
- Pitch deck and product evidence
- Patent or IP filings, if any
- Board resolution authorising the application
Choosing the three years
The deduction is valuable only in profitable years, so most startups wait until profits are expected and then claim for three consecutive years. Model the years carefully, because losses in the chosen block reduce the benefit. A company that opts for the concessional corporate tax regime without Chapter VI-A deductions cannot also claim this deduction, so compare the effective tax under each option; minimum alternate tax may still apply under the normal regime.
Claiming the deduction
Claim the deduction in the income tax return for each chosen year, with the audit report and the IMB certificate on record. Keep the deduction confined to profits of the eligible business. The tax department can deny the claim if the conditions, such as the turnover limit, are breached in that year.
Timeline for the IMB application
Apply as soon as you can show real innovation and some financial track record, rather than waiting until the first profitable year. The IMB certificate is a precondition for the claim, and approval is not guaranteed, so a rejection leaves time to strengthen the application and reapply before the profitable block begins.
Common mistakes
Assuming DPIIT recognition is enough, applying for the IMB certificate after the return is due, claiming in a loss year, or choosing the concessional tax regime and then claiming the deduction are the most frequent errors. Partnerships and proprietorships are not eligible even if DPIIT-recognised.
Step by step
- 1Get DPIIT recognition
Obtain the startup recognition certificate.
- 2Check eligibility
Confirm entity type, incorporation date and turnover.
- 3Prepare application
Assemble financials, innovation note and IP evidence.
- 4Apply to IMB
Submit the application on the Startup India portal.
- 5Respond to queries
Provide clarifications or a presentation if asked.
- 6Plan the block
Choose three consecutive profitable years within the first ten.
- 7Claim in ITR
Claim the deduction with the audit report on record.
Related services
Sources
- Startup India – DPIIT recognition page
- InCorpX – Section 140 of the Income-tax Act 2025 (startup tax holiday)
- Income Tax Department – e-filing portal
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. You also need an Inter-Ministerial Board certificate of eligible business.
What is the new section for 80-IAC?
Section 140 of the Income-tax Act 2025, which applies from tax year 2026-27.
Can an LLP claim the startup tax holiday?
Yes. Private limited companies and LLPs are eligible; partnership firms and proprietorships are not.
Until when must the startup be incorporated?
On or after 1 April 2016 and before 1 April 2030.