🚀 Startup India Tax Exemptions — Complete Guide 2025

By Revenue Dynamics Tax Advisory

Published: 28 November 2025

Category: Startup & Business Registrations

1. Executive Summary

Startup India provides powerful tax exemptions that help new businesses reduce financial burden, attract investors, and grow faster.

From income tax holidays to angel tax exemption and capital gains benefits, DPIIT-recognised startups enjoy multiple advantages — but only if the founder understands the eligibility rules and follows the correct application process.

This guide simplifies all the tax benefits available under Startup India.

2. What is Startup India?

Startup India is a Government of India initiative launched to support innovative, high-potential startups with:

✔ Tax exemptions

✔ Funding support

✔ Easier compliance

✔ Patent fee reductions

✔ Faster approvals

To access tax exemptions, a startup must be recognised by DPIIT.

3. Eligibility for Startup India Recognition

A business qualifies as a startup if:

✔ Age of Company

Up to 10 years from incorporation.

✔ Type of Entity

Only these are allowed:

• Private Limited Company

• LLP

• Registered Partnership Firm(Proprietorship NOT eligible)

✔ Turnover

Not exceeded ₹100 crore in any financial year.

✔ Innovation Requirement

The business must be:

• New and innovative

• Scalable

• Technology-driven or improving existing products/processes

✔ Not Formed by Splitting or Reconstruction

You cannot simply break an existing business into a “new startup.”

4. Startup India – Major Tax Exemptions (Complete List)

A) Section 80-IAC – 100% Income Tax Exemption for 3 Years

A DPIIT-recognised startup can get a full tax holiday for any 3 consecutive years out of the first 10 years.

Conditions:

✔ Must be incorporated as Pvt Ltd or LLP

✔ Must hold DPIIT certificate

✔ Turnover below ₹100 crore

✔ Must be approved by the Inter-Ministerial Board (IMB)

Best For:

Startups planning aggressive reinvestment and early-stage growth.

B) Angel Tax Exemption — Section 56(2)(viib)

DPIIT-recognised startups are exempt from the “Angel Tax” on share premium.

This exemption covers investment from:

✔ Resident investors

✔ Angel investors

✔ VC firms

✔ Alternative Investment Funds (AIF Cat-I & II)

Benefits:

• No tax on share premium

• Higher valuation accepted

• SAFE notes & CCPS also recognised

• Helps raise funds without tax scrutiny

C) Capital Gains Exemption – Section 54EE

Invest capital gains into notified startup funds to claim exemption.

Conditions:

• Maximum investment limit: ₹50 lakh

• Lock-in: 3 years

Useful when founders sell assets to reinvest in the startup.

D) Section 54GB – Capital Gains on Property Sale

If a founder sells a residential property and invests the gains into equity of a startup, the capital gain becomes exempt.

Conditions:

• Startup must be DPIIT-recognised

• Funds must be used for purchasing new plant & machinery

• Shares must be held for at least 5 years

5. Step-by-Step Process to Apply for Startup Recognition

Step 1: Create Login on Startup India Portal

https://www.startupindia.gov.in/

Step 2: Fill Up the Online Form

Enter:

✔ Company details

✔ Directors/partners

✔ Industry

✔ Innovation details

✔ Funding details (if any)

Step 3: Upload Required Documents

• Incorporation Certificate

• PAN

• Company profile

• Pitch deck

• Website link

• Social profiles

• Proof of innovation (patent, prototype, screenshots, market study)

Step 4: Submit the Application

Once approved, you receive the DPIIT Recognition Certificate.

Step 5: Apply for Tax Exemptions (Separate Process)

Tax exemptions require additional approvals from:

✔ Inter-Ministerial Board (IMB)

✔ CBDT (for angel tax exemption)

6. Documents Required for Tax Exemptions

✔ Certificate of Incorporation

✔ PAN of the company

✔ DPIIT Recognition Certificate

✔ IMB certification (for 80-IAC)

✔ Pitch deck

✔ Board resolution

✔ Financial statements

✔ Valuation report (for Angel Tax exemption)

7. Common Mistakes Founders Make

❌ Applying for tax exemption without DPIIT recognition

❌ Poorly explained innovation in the application

❌ Not maintaining proper share registers

❌ Wrong valuation method during fundraising

❌ Not updating MCA filings after allotment

❌ Confusion between recognition and exemption

RDTA fixes all of these for founders.

8. RDTA Expert Tips

✔ Always apply for DPIIT recognition before raising funds

✔ Maintain proper documentation for valuation

✔ Choose 3 consecutive years for 80-IAC wisely

✔ Ensure ESOP structuring is compliant

✔ Use AIF (Category I & II) to avoid angel tax queries

✔ Build yearly compliance calendar (RDTA can help)

9. FAQs

Q1. Is DPIIT recognition enough for tax exemption?

No. Recognition + separate IMB approval is required.

Q2. Can OPC apply for Startup India?

No. Only Pvt Ltd, LLP, or Partnership Firm.

Q3. Does a startup need patents?

Not mandatory, but helpful.

Q4. Can a startup with no revenue apply?

Yes, early-stage startups are eligible.

Q5. What happens after 10 years?

You lose “startup” status.

10. Conclusion

Startup India provides some of the most powerful tax exemptions for eligible startups. With the right guidance, founders can secure DPIIT recognition, raise funds without angel tax issues, and enjoy a 3-year income tax holiday.

If you want professional help with Startup India registration, IMB approval, and tax exemption setup — RDTA is your trusted compliance partner.

11. Work With RDTA

Work With RDTA — Your Startup Compliance Partner

At Revenue Dynamics Tax Advisory, we help founders build strong, compliant, tax-efficient startups.

We provide:

✔ DPIIT Recognition

✔ Startup India Registration

✔ Section 80-IAC Tax Holiday Approval

✔ Angel Tax Exemption (56(2)(viib))

✔ Share Allotment & MCA Filings

✔ ESOP structuring

✔ IMB Application Guidance

✔ Valuation Reports

✔ Compliance Calendar Setup

📞 9710675224

🌐 www.rdtaxadvisory.in

📧 info@rdtaxadvisory.in

Grow your startup with the right structure, the right exemptions, and the right guidance.