Does DPIIT recognition give you the income tax exemption?
No. DPIIT recognition makes your business a “startup” for the government’s schemes. The income tax holiday, a deduction of 100% of profits for any three years out of your first ten, needs a second, separate certificate from an Inter-Ministerial Board, and only private limited companies and LLPs can get it (Section 140, Income Tax Department). Recognition is the common first step. The tax certificate is a much narrower one.
Two approvals, not one
Founders often hear “register on Startup India and you won’t pay tax for three years”. That runs two different things together. By 31 January 2026, 2,12,283 entities had been recognised as startups by DPIIT (PIB, 17 March 2026). By May 2025, just over 3,700 startups had been granted the tax exemption since the scheme began (PIB, 15 May 2025). Most recognised startups never get the tax holiday, and many never need it.
| DPIIT recognition | Tax holiday certificate | |
|---|---|---|
| Who decides | DPIIT, through the Startup India portal | The Inter-Ministerial Board of Certification |
| Who can apply | Private limited company, partnership firm, LLP, or a cooperative society | Only a private limited company or an LLP |
| Age | Up to 10 years from incorporation (20 years for deep tech) | Incorporated on or after 1 April 2016 and before 1 April 2030 |
| Turnover | Not above ₹200 crore in any year (₹300 crore for deep tech; G.S.R. 108(E)) | Not above ₹100 crore, per the Income Tax Department’s text (Section 140) |
| What it asks for | Work towards innovation, or a scalable model with high potential for jobs or wealth creation | Evidence: IP, product stage, revenue and growth, funding, jobs, awards |
| What you get | Startup status and the benefits listed below | 100% of profits deducted for any 3 consecutive years out of the first 10 |
The recognition rules above come from DPIIT’s notification G.S.R. 108(E) of 4 February 2026 (gazette notification), which replaced the 2019 rules. The turnover limit rose from ₹100 crore to ₹200 crore, and deep-tech startups got longer and larger limits. An entity formed by splitting up or reconstructing an existing business still does not count as a startup.
What DPIIT recognition gives you
- The door to other schemes. Central schemes such as the Credit Guarantee Scheme for Startups ask for it, and so do state startup policies, including Haryana’s and Chandigarh’s. See startup grants in the Tricity.
- Cheaper, faster patents. An 80% rebate on patent filing fees compared with other companies, and patent applications fast-tracked for examination (Startup India).
- Government tenders. Exemption from paying an Earnest Money Deposit or bid security (Startup India).
- A faster exit if it doesn’t work. Eligible startups can be wound up within 90 days of an insolvency application (Startup India).
One benefit that no longer matters: the “angel tax” under Section 56(2)(viib) does not apply to anyone from assessment year 2025-26, recognised or not (Income Tax Department). You no longer need recognition to avoid it.
The tax holiday: what it is and who gets it
Under the Income-tax Act, 2025, the deduction sits in Section 140. Under the old 1961 Act it was Section 80-IAC, the name most people still use. It lets an eligible startup deduct 100% of the profits of its business for three consecutive tax years, chosen from the first ten years after incorporation (Section 140, Income Tax Department).
To claim it, the startup must be a company or an LLP, incorporated on or after 1 April 2016 and before 1 April 2030, and hold a certificate of eligible business from the Inter-Ministerial Board (Section 140). Partnership firms and cooperative societies can be DPIIT-recognised, but cannot claim this deduction.
The Income Tax Department’s published text sets the turnover limit at ₹100 crore (Section 140). Some law-firm commentary says the Finance Act 2026 raised it. Until the Department’s text changes, plan on ₹100 crore and confirm with your CA.
What it does not do: it deducts profits. If your startup makes no profit in those years, there is nothing to deduct. That is why we tell most early-stage founders to treat it as a later decision, made with their CA, not a reason to incorporate.
How to apply for the tax certificate
- Get DPIIT recognition as a private limited company or an LLP.
- Fill the Form 80-IAC application on the Startup India portal (Startup India).
- Attach audited, CA-certified accounts for the past three years (or since incorporation) and the evidence the Board scores: intellectual property, awards, product stage, research staff, funding, revenue and its growth, profitability, and the jobs you have created, including in non-metro cities (Form 80-IAC scorecard).
- If the Board approves, you get a certificate of eligible business. Your CA then claims the deduction in your return for the years you choose.
Where LABH fits
In the Structure week of our six-week program we check whether your entity and your innovation statement meet DPIIT’s criteria, and what evidence the tax board would want later. You, or your CA, file both applications on the Startup India portal. LABH is not a registration agency or a CA firm, and nobody can promise you either certificate.
Questions founders ask
Can a partnership firm get the startup tax exemption?
No. A partnership firm or a cooperative society can be DPIIT-recognised, but only a private limited company or an LLP can claim the tax holiday (Section 140 of the Income-tax Act, 2025, formerly Section 80-IAC).
Do I still need DPIIT recognition to avoid angel tax?
No. Section 56(2)(viib), the “angel tax”, does not apply to anyone from assessment year 2025-26, whether or not the startup is recognised.
What is the turnover limit for DPIIT recognition in 2026?
₹200 crore in any financial year since incorporation, or ₹300 crore for a deep-tech startup, under DPIIT notification G.S.R. 108(E) of 4 February 2026. Under the 2019 rules it was ₹100 crore.
How long does DPIIT recognition last?
A business counts as a startup for up to ten years from its incorporation or registration (twenty for deep tech), as long as its turnover stays within the limit.
Not sure where your startup stands?
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Saksham Agarwal is the founder of LABH Advisory in Mohali, a Registered Mentor on BHASKAR (Startup India’s national registry, run by DPIIT) and a member of TiE Chandigarh. LinkedIn
Sources
Checked against these official sources on 30 October 2026. Schemes change, so check the source before you apply.
- DPIIT notification G.S.R. 108(E), 4 February 2026: definition of a startup
- Income Tax Department: Section 140, Income-tax Act, 2025 (deduction for eligible start-ups)
- Income Tax Department: taxation of start-ups (Section 56(2)(viib) note)
- Startup India: recognition and tax exemption
- Startup India: Form 80-IAC application and scorecard
- Startup India: Startup India action plan benefits (patents, procurement, exit)
- PIB, 15 May 2025: over 3,700 startups granted the tax exemption
- PIB, 17 March 2026: 2,12,283 recognised startups as on 31 January 2026