Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The holiday isn't fully tax-free
The 80-IAC holiday exempts your profits from normal income tax, but the MAT / AMT regime is separate. A company can still be liable for MAT on its book profits, and an LLP for AMT — so even in a holiday year you may have a minimum cash tax. This surprises founders who assume the holiday means nil tax. Confirm current MAT/AMT rates and whether your regime choice affects them.
But you get a credit
The MAT/AMT you pay isn’t lost — it becomes a credit you can set off against normal tax in future years (when you’re no longer in the holiday and pay regular tax). Note also that opting for the concessional company tax regime (115BAA) removes MAT but also bars many incentives — a trade-off to model. So the interaction needs planning.
A worked example
Example: a startup in its 80-IAC holiday makes ₹1 crore book profit — its normal tax is nil (deduction), but it pays MAT on the book profit, creating a cash outflow and a MAT credit. A founder who budgeted for zero tax is caught out. Modelling MAT/AMT before claiming the holiday avoids the surprise. Our team can model your effective tax during the holiday.