{"id":1043,"date":"2025-10-15T00:00:00","date_gmt":"2025-10-15T00:00:00","guid":{"rendered":"https:\/\/rize.blog.razorpay.in\/startup-india-tax-exemption\/"},"modified":"1970-01-01T00:00:00","modified_gmt":"1970-01-01T00:00:00","slug":"startup-india-tax-exemption","status":"publish","type":"post","link":"https:\/\/razorpay.com\/rize\/blogs\/startup-india-tax-exemption\/","title":{"rendered":"Startup India Tax Exemption Eligibility \u2013 Everything You Need to Know"},"content":{"rendered":"<h2 id=\"\"><strong id=\"\">Startup Definition as per the Startup India Action Plan<\/strong><\/h2>\n<p id=\"\">According to the <strong id=\"\">Startup India Action Plan<\/strong>, a <strong id=\"\">startup<\/strong> is defined as:<\/p>\n<ul id=\"\">\n<li>An <strong id=\"\">entity that is less than five years old<\/strong> from the date of incorporation or registration.<\/li>\n<li>Has a <strong id=\"\">turnover not exceeding INR 25 crore<\/strong> in any financial year.<\/li>\n<li>Is <strong id=\"\">working toward innovation, development, or improvement<\/strong> of products, processes, or services; or has a scalable business model with a high potential for employment generation or wealth creation.<\/li>\n<\/ul>\n<p id=\"\">Additionally, the entity <strong id=\"\">must not be formed by splitting up or reconstructing<\/strong> an existing business.<\/p>\n<p id=\"\">Startups can access tax benefits <strong id=\"\">only after certification from the Inter-Ministerial Board (IMB)<\/strong>, which examines the business model, innovation, and scalability before granting approval.<\/p>\n<h2 id=\"\"><strong id=\"\">Eligibility for Startup India<\/strong><\/h2>\n<p id=\"\">To qualify under the <a id=\"\" href=\"https:\/\/razorpay.com\/rize\/blogs\/startup-india-scheme\/\"><strong id=\"\">Startup India scheme<\/strong><\/a>, a business must meet the following eligibility conditions:<\/p>\n<h3 id=\"\"><strong id=\"\">Age of the Company:<\/strong><\/h3>\n<p id=\"\">The entity must be <strong id=\"\">less than 10 years old<\/strong> from the date of incorporation or registration.<\/p>\n<h3 id=\"\"><strong id=\"\">Type of Entity:<\/strong><\/h3>\n<p id=\"\">It should be registered as a <a id=\"\" href=\"https:\/\/razorpay.com\/rize\/company-registration\/private-limited\"><strong id=\"\">Pvt. Ltd. Company<\/strong><\/a>, <a id=\"\" href=\"https:\/\/razorpay.com\/rize\/company-registration\/partnership-firm\"><strong id=\"\">Partnership Firm<\/strong><\/a>, or <a id=\"\" href=\"https:\/\/razorpay.com\/rize\/company-registration\/llp\"><strong id=\"\">Limited Liability Partnership (LLP)<\/strong><\/a>.<\/p>\n<h3 id=\"\"><strong id=\"\">Turnover Limit:<\/strong><\/h3>\n<p id=\"\">The startup\u2019s <strong id=\"\">annual turnover must not exceed INR 100 crore<\/strong> in any financial year since incorporation.<\/p>\n<h3 id=\"\"><strong id=\"\">Innovation Focus:<\/strong><\/h3>\n<p id=\"\">The startup should aim to <strong id=\"\">develop innovative products, processes, or services<\/strong>, or have a <strong id=\"\">scalable business model<\/strong> with high job creation or wealth generation potential.<\/p>\n<h3 id=\"\"><strong id=\"\">Non-Reconstruction Clause:<\/strong><\/h3>\n<p id=\"\">The startup <strong id=\"\">must not be formed by restructuring or splitting up<\/strong> an existing business.<\/p>\n<h2 id=\"\"><strong id=\"\">Startups Eligible for Startup India Tax Exemptions &amp; Incentives<\/strong><\/h2>\n<p id=\"\">To qualify, startups must:<\/p>\n<ul id=\"\">\n<li>Be <strong id=\"\">recognised under DPIIT<\/strong> (Department for Promotion of Industry and Internal Trade).<\/li>\n<li>Be <strong id=\"\">involved in innovating or improving<\/strong> existing products, services, or processes.<\/li>\n<li id=\"\">Be <strong id=\"\">supported or funded<\/strong> by: \n<ul id=\"\">\n<li>Recognised incubators or government schemes, or<\/li>\n<li>SEBI-registered venture capital funds, or<\/li>\n<li>Hold <strong id=\"\">granted patents<\/strong> that support innovation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p id=\"\">Startups that <strong id=\"\">lack innovative value<\/strong>, engage in <strong id=\"\">routine business models<\/strong>, or do not contribute to technological advancement are <strong id=\"\">not eligible<\/strong> for these tax incentives.<\/p>\n<h2 id=\"\"><strong id=\"\">Obtaining Startup Tax Exemption under the Startup India Initiative<\/strong><\/h2>\n<p id=\"\">To avail tax exemptions, startups must go through a formal <strong id=\"\">approval and verification process<\/strong> by the <strong id=\"\">Inter-Ministerial Board (IMB)<\/strong> constituted by the <strong id=\"\">Department for Promotion of Industry and Internal Trade (DPIIT) to qualify for tax exemptions<\/strong>.<\/p>\n<h3 id=\"\"><strong id=\"\">Steps to Obtain Startup Tax Exemption:<\/strong><\/h3>\n<h4 id=\"\"><strong id=\"\">1. Get DPIIT Recognition:<\/strong><\/h4>\n<p id=\"\">Before anything else, your entity must be a DPIIT-recognised startup. This involves registering on the <a id=\"\" href=\"https:\/\/www.startupindia.gov.in\/\" target=\"_blank\" rel=\"noopener\">Startup India portal<\/a> and certifying your eligibility (age, turnover, entity type, etc.).<\/p>\n<h4 id=\"\"><strong id=\"\">2. Prepare Your Application &amp; Documents:<\/strong><\/h4>\n<p id=\"\">This is the most crucial step. The IMB needs to be convinced of your startup&#8217;s <em id=\"\">genuine innovation<\/em>. Your application must be supported by a detailed set of documents, which typically includes:<\/p>\n<ul id=\"\">\n<li><strong id=\"\">Business Documents:<\/strong> Your Memorandum of Association (MoA) or LLP Deed.<\/li>\n<li><strong id=\"\">Financials:<\/strong> Audited annual accounts and Income Tax Returns (ITRs) for the last three financial years (or since incorporation, if newer).<\/li>\n<li id=\"\"><strong id=\"\">The &#8220;Innovation&#8221; Proof (Pitch Deck \/ Video):<\/strong> A presentation and\/or a short video (under 2-5 minutes) that clearly explains: \n<ul id=\"\">\n<li>What your product\/service is.<\/li>\n<li>What new problem it solves.<\/li>\n<li>How it is innovative (e.g., a new technology, a disruptive process, or a significant improvement on an existing solution).<\/li>\n<li>Your business model and scalability.<\/li>\n<\/ul>\n<\/li>\n<li><strong id=\"\">Shareholding Information:<\/strong> Details of your current shareholding pattern.<\/li>\n<li><strong id=\"\">CA Certificate:<\/strong> A certificate from a Chartered Accountant verifying that your startup has not been formed by splitting up or reconstructing an existing business.<\/li>\n<\/ul>\n<h4 id=\"\"><strong id=\"\">3. Submit the Application:<\/strong><\/h4>\n<p id=\"\">The application for tax exemption (<a id=\"\" href=\"https:\/\/www.startupindia.gov.in\/content\/sih\/en\/form80iac.html\" target=\"_blank\" rel=\"noopener\">Form 80-IAC<\/a>) is also filed through the Startup India portal. You will upload all your prepared documents and fill in the required fields.<\/p>\n<h4 id=\"\"><strong id=\"\">4. IMB Verification:<\/strong><\/h4>\n<p id=\"\">The IMB board (which includes members from DPIIT, Department of Biotechnology, etc.) will formally review your application. Their entire focus is to determine if your startup is &#8220;working towards innovation, development or improvement of products or processes or services&#8221; and is not just a conventional business.<\/p>\n<h4 id=\"\"><strong id=\"\">5. Receive Certification:<\/strong><\/h4>\n<p>If the IMB is satisfied, you will be granted the certificate of eligibility. You can then use this certificate to claim the 100% tax deduction when filing your Income Tax Returns (ITR) for any three consecutive years within your first ten years.<\/p>\n<p>\u200d<\/p>\n<h2 id=\"\"><strong id=\"\">Common Mistakes: Why IMB Applications Get Rejected<\/strong><\/h2>\n<p id=\"\">Many startups get DPIIT recognition but fail the IMB certification. Be careful to avoid these common pitfalls:<\/p>\n<ul id=\"\">\n<li><strong id=\"\">Insufficient Proof of Innovation:<\/strong> This is the #1 reason for rejection. Simply having a new website or app is not enough. You must prove you are solving a problem in a <em id=\"\">new<\/em> way, have a new technology, or are creating a unique, scalable process.<\/li>\n<li><strong id=\"\">Incomplete or Vague Pitch Deck:<\/strong> If the board cannot understand what your business does or why it&#8217;s innovative within a few minutes, your application will be rejected or deferred.<\/li>\n<li><strong id=\"\">Incorrect Documents:<\/strong> Submitting unsigned financials, a missing CA certificate, or an incomplete MoA will lead to rejection on technical grounds.<\/li>\n<li><strong id=\"\">Reconstruction of an Old Business:<\/strong> The IMB is strict about this. If your &#8220;startup&#8221; is just an old business (e.g., a consultancy or services firm) repackaged under a new name to avoid taxes, it will be rejected.<\/li>\n<li><strong id=\"\">Lack of Scalability:<\/strong> The IMB also looks for businesses with high potential for wealth creation or employment generation. A small lifestyle business, even if innovative, may not qualify.<\/li>\n<\/ul>\n<h2 id=\"\"><strong id=\"\">Frequently Asked Questions (FAQs)<\/strong><\/h2>\n","protected":false},"excerpt":{"rendered":"<p>Understand the eligibility criteria for Startup India tax exemption. Learn about Section 80-IAC benefits, recognition process, and key conditions for startups.<\/p>\n","protected":false},"author":1,"featured_media":1044,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1043","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/comments?post=1043"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1043\/revisions"}],"predecessor-version":[{"id":1331,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1043\/revisions\/1331"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media\/1044"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media?parent=1043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/categories?post=1043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/tags?post=1043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}