Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Three years out of ten
The holiday is three consecutive financial years of full profit deduction, and you may pick any such block within your first 10 years. Because most startups make losses early, the freedom to choose the years is the valuable part.
Choosing the right block — and MAT
Time the three years for when profits are highest. Note one catch: MAT / AMT (minimum alternate tax) can still apply during the holiday, so model your cash tax rather than assuming zero. Confirm the current MAT position and the incorporation cut-off per the latest Finance Act.
A worked example
Picture a startup incorporated in 2024 that makes losses in years one to three and becomes profitable from year four. It can claim 80-IAC for years 4–6, deducting 100% of those profits in each of the three consecutive years. The choice is deliberate: claiming the holiday in early loss-making years would waste it, because there are no profits to shelter. To reach this point the startup must first secure Inter-Ministerial Board approval, which is separate from DPIIT recognition. Two practical cautions: MAT/AMT may still create a cash-tax outflow even in holiday years, and the deduction simply exempts the chosen years’ profits rather than changing how brought-forward losses are used — so model the holiday alongside your losses to pick the genuinely most valuable three-year block. Confirm the current incorporation cut-off and MAT position per the latest Finance Act. See how to claim the holiday, or our 80-IAC & DPIIT guide.