Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 13 October 2026
How the holiday and MAT coexist
The 80-IAC deduction wipes the normal taxable profit, but MAT is computed on book profit — which the deduction does not touch. A startup with ₹2 crore of book profit in a holiday year still pays MAT at 15% (plus surcharge and cess), carrying the amount forward as MAT credit (section 115JAA) to set off within fifteen years when normal tax exceeds MAT. LLPs mirror this under AMT: 18.5% on adjusted total income, credit under 115JD.
The 115BAA fork in the road
A company that opts for the 22% regime of section 115BAA escapes MAT entirely — but surrenders 80-IAC (the regime bars that family of deductions). So the real comparison is: 80-IAC with 15% MAT now and credit later versus flat 22% with no holiday. For a startup expecting thin profits in the holiday window, 115BAA’s simplicity often wins; for one with a fat profit spike inside the window, the holiday plus credit can beat it. Model both before electing — 115BAA is effectively one-way.
Using the holiday well
Eligibility first: incorporation up to 1 April 2030, turnover within ₹100 crore, DPIIT recognition and the Inter-Ministerial Board certificate. Then choose the three years — the election is yours, so aim it at the highest-profit years inside the first ten, with MAT modelled alongside. From Tax Year 2026-27 the architecture continues under the Income-tax Act, 2025. Our startup tax practice runs the 80-IAC-versus-115BAA model as a standard worksheet.