DPIIT Approves 187 Startups For Income Tax Exemptions

SUMMARY

While 75 startups were cleared for exemptions during the 79th IMB meeting, another 112 received the government’s nod during the 80th meeting

With this, more than 3,700 startups have now been granted tax exemptions under the scheme since its inception in 2017

FM Sitharaman, in Budget 2025-26 speech proposed extending the eligibility window for startups to apply for benefits provided under Section 80-IAC for an additional period of 5 years to 2030

The Department for Promotion of Industry and Internal Trade (DPIIT) has approved 187 startups for tax exemptions under the revised Section 80-IAC of the Income Tax Act.

In a statement, the commerce ministry said that 75 startups were cleared for exemptions during the 79th Inter-Ministerial Board (IMB) meeting and 112 startups received the nod during the 80th meeting.

With this, more than 3,700 startups have now been granted tax exemptions under the scheme since its inception.

This follows finance minister Nirmala Sitharaman, in her budget speech 2025-26, proposing extending the eligibility window for startups to apply for benefits provided under Section 80-IAC for a period of five years. With this, startups incorporated before April 1, 2030 will be eligible to receive this financial relief.

In its statement, the commerce ministry said that the revised evaluation framework introduced by the DPIIT has made the “application process more structured and transparent”. It added that complete applications are now reviewed within 120 days, which ensures “faster decision-making and reduces procedural delays”.

“Startups that were not approved in the latest round have been encouraged to reassess and refine their applications. The DPIIT has advised applicants to focus on demonstrating technological innovation, market potential, scalability, and a clear contribution to employment and economic growth,” the ministry added.

Tax Exemption Scheme & Challenges

With an eye on spurring the homegrown startup ecosystem, the government introduced Section 80-IAC on April 1, 2017. It allows eligible startups to avail a 100% income tax deduction on profits for any three consecutive years within a 10-year window from the date of incorporation.

The rule is aimed at helping startups save on taxes and use that amount to grow their operations and business. This has come in handy for new-age tech companies struggling to grow their scale.

However, there are a slew of mandates for availing such incentives. For starters, the applicant startup has to be DPIIT-registered, “work towards innovation” and hold a turnover of less than INR 100 Cr. Even then, the approvals are hard to come by.

For context, more than 1.6 Lakh startups are registered with the DPIIT yet just more than 3,700 startups have been granted tax exemptions under the scheme since its inception.

This is largely in line with the issues flagged by a Parliamentary panel in 2023. At the time, the Parliamentary Standing Committee on Commerce said that only 10,165 startups of the then 98,119 registered startups had applied for tax benefits under 80-IAC.

The panel had recommended relaxing the eligibility criteria for startups to avail benefits under the income tax law, noting that only 1% of recognised startups had eligibility certificate.

The committee had also flagged that the application submissions were fraught with challenges such as lack of clarity in the process and non-friendly user interface, which led to under-utilisation of the provision related to tax benefits.