How to Get DPIIT Recognition and Tax Exemption Under Section 80IAC in India

For startups in India looking to access government incentives, funding support, and tax exemptions, obtaining recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) is often the first critical step. While not mandatory, DPIIT recognition opens the door to a host of benefits that can significantly ease the path to growth.

To begin with, your startup must be legally registered as a Private Limited Company, a Limited Liability Partnership (LLP), or a Registered Partnership Firm. Once your business is incorporated, you can apply for DPIIT recognition through the Startup India portal (startupindia.gov.in). The application requires basic details such as the name of the company, the date of incorporation, the PAN card number, and other supporting documents like your Certificate of Incorporation and company constitution documents.

After you’ve submitted the application, DPIIT typically takes around two to three weeks to review and process it. Once approved, you’ll receive a certificate of recognition. This not only validates your startup status under the Government of India’s Startup India initiative but also makes you eligible for several privileges. These include tax exemptions, the ability to fast-track patent applications, access to easier public procurement norms, and eligibility for funding schemes through various government-linked funds.

One of the most valuable benefits that DPIIT-recognized startups can access is the income tax exemption under Section 80IAC of the Income Tax Act, 1961. This exemption allows eligible startups to claim a 100% tax holiday for three consecutive assessment years out of their first ten years since incorporation. But accessing this benefit requires one more step beyond DPIIT recognition—the approval of an Inter-Ministerial Board (IMB).

To get the IMB’s approval, a startup must submit a Detailed Project Report (DPR) through the Startup India portal. The DPR serves as a comprehensive blueprint of the startup’s business model and future potential. It includes the company’s background, a clear explanation of the product or service being offered, market analysis, marketing and sales strategies, operational plans, team structure, and detailed financial projections. Additionally, the report should highlight the expected social and economic impact of the startup’s activities, particularly in terms of employment generation and innovation.

Once the DPR is reviewed and found satisfactory by the DPIIT, the startup is invited to present its case before the Inter-Ministerial Board. This board includes representatives from various government departments who assess whether the startup meets the criteria laid out under Section 80IAC. During this presentation, startups may be asked to elaborate on various aspects of their business such as intellectual property, hiring plans, revenue model, and social impact.

If the board is satisfied, a certificate of eligibility is granted. This certificate must be submitted while filing your income tax return in order to claim the exemption. It’s also important to note that the IMB may require an annual renewal of this certificate to ensure the startup continues to meet the necessary conditions throughout the exemption period.

The overall process—from DPIIT recognition to receiving the IMB certificate—can take several weeks or even a few months, depending on the volume of applications and the thoroughness of your documentation. For any founder planning to claim this exemption, it is highly recommended to initiate the process early and maintain all records diligently.

In essence, while the journey to gain tax exemption under Section 80IAC involves multiple steps and careful preparation, the benefits it offers can be a game-changer for early-stage startups. From freeing up cash flows to validating your business in the eyes of investors and partners, DPIIT recognition and the accompanying tax relief can help you focus more on building and scaling your venture—and less on worrying about compliance and costs.