Eligible Startup

Eligible startup is the specific legal term under the Income Tax Act — defined in the Explanation to Section 80-IAC — that determines which companies can claim the 3-year profit tax holiday. It is narrower than DPIIT recognition and requires a separate government approval.

Who qualifies

A company or LLP that meets all of the following:

• Incorporated as a company or LLP only — registered partnership firms do not qualify
• Incorporated on or after 1 April 2016 and before 1 April 2030 (the current extended window)
• Annual turnover does not exceed ₹100 crore in any financial year since incorporation
• The business involves innovation, development, deployment, or commercialisation of a new product, process, or service driven by technology or intellectual property
• Has obtained Inter-Ministerial Board (IMB) approval specifically for the Section 80-IAC exemption

What you get

An eligible startup can claim a 100% deduction of profits for any three consecutive assessment years within the first ten years from incorporation. In those three years, the company pays zero income tax on its profits — not a deferral or credit, a full deduction. See Section 80-IAC for the full mechanics.

What most founders miss

DPIIT recognition alone is not enough. This is the most common misconception. DPIIT recognition is a self-certified, near-automatic process — it establishes that you are a "startup" for programme purposes. Eligible startup status requires a separate IMB application where DPIIT, Ministry of Finance, and MSME representatives actively evaluate whether your business is genuinely innovative. The IMB can reject the application.

Partnership firms are excluded. A registered partnership firm can get DPIIT recognition and access all other Startup India benefits — but it cannot be an eligible startup for 80-IAC purposes. Many founders operating as a partnership who convert to private limited company need to file a fresh IMB application after conversion.

The incorporation date is a hard cutoff. Companies incorporated before 1 April 2016 do not qualify regardless of what they build, how much they innovate, or what their recognition status is.

See also

• Section 80-IAC — the tax holiday available to eligible startups
• DPIIT Recognition — the prerequisite recognition, not sufficient on its own
• Section 80-IAC: how to claim the 3-year tax holiday