DPIIT Startup Recognition and Tax Holiday: 2026 Guide for India

Who qualifies for DPIIT recognition after February 2026?

Under the notification of 4 February 2026, an entity can be recognised as a startup for up to 10 years from incorporation or registration, provided turnover has not exceeded ₹200 crore in any financial year. Eligible forms are private limited companies, registered partnership firms, LLPs and cooperative societies. Deep-tech startups have longer and higher limits.

The business must also work towards innovation, development or improvement of products, processes or services, or have a scalable model with high potential for employment or wealth creation. Incorporation alone does not show this. Explain the customer problem, the solution, what is different about it and how the business can grow, with evidence rather than broad marketing claims.

Check how the entity was formed. A business created by splitting up or reconstructing an existing business is not eligible. Track age and turnover against the limits each year and keep financial statements that support them. Describe what the business actually does instead of choosing a category that sounds attractive but does not fit.

How do the deep-tech limits differ?

Deep-tech startups can remain recognised for up to 20 years from incorporation with turnover up to ₹300 crore, reflecting longer research and commercialisation cycles. Using software or AI does not by itself make a business deep-tech. The classification needs to be supported by the scientific or engineering work the business actually undertakes.

Prepare a clear account of the technical challenge, development path, research effort and validation milestones, together with any intellectual property, test results, prototypes or research collaborations. Separate achieved milestones from planned ones. A roadmap is useful, but it should not be presented as proof of a capability that does not yet exist.

The longer deep-tech recognition period does not extend the tax holiday, which is still limited to three consecutive years within the first ten years and to turnover of ₹100 crore. Keep separate records for recognition, tax eligibility and each scheme application, and recheck the applicable limits for each rather than treating one certificate as covering everything.

What are the section 140 tax-holiday conditions?

Section 140 of the Income-tax Act, 2025 (formerly section 80-IAC of the 1961 Act) allows a deduction of 100% of profits for any 3 consecutive years out of the first 10. It applies to a company or LLP incorporated on or after 1 April 2016 and before 1 April 2030, with turnover not exceeding ₹100 crore in the relevant year and an Inter-Ministerial Board certificate.

Registered partnership firms and cooperative societies can be recognised by DPIIT but cannot claim this deduction, which is limited to companies and LLPs. The business must also meet the eligible-business conditions and obtain the IMB certificate. Recognition supports the application, but it is not permission to claim the deduction.

Forecast profits before choosing which three consecutive years to claim; a loss-making year gives no benefit. Keep the IMB certificate, financial statements, tax computation and supporting workings together. The ₹200 crore recognition limit and ₹300 crore deep-tech limit do not replace the ₹100 crore turnover condition for the tax holiday.

What changed when angel tax was abolished?

Section 56(2)(viib), known as angel tax, was abolished from 1 April 2025, applying from assessment year 2025-26 onwards. There is no longer a current exemption to apply for under that provision. Valuations remain necessary for other reasons, including Companies Act allotments, FEMA pricing for NRI and foreign investors, and ESOPs.

For each funding round, identify the instrument, issue route, investor residency and allotment date, then obtain the valuation and approvals the transaction needs, including a registered valuer’s report where the Companies Act requires one. FEMA pricing and reporting apply separately to non-resident investors, and a term sheet does not satisfy those rules on its own.

Earlier years are still governed by the law that applied to them, so abolition does not automatically close past assessments or disputes. ESOP valuations also serve separate accounting and employee-tax purposes. Confirm the purpose of each valuation, because one generic report may not meet every requirement.

Which documents should founders prepare?

Prepare the certificate of incorporation or registration, PAN, details of directors or partners and the authorised representative, and a clear write-up of the business showing innovation or scalability. Age and turnover evidence should match the application. Deep-tech classification and the IMB tax application may each need additional supporting material.

A useful pack can include a product note, pitch deck, website or demo link, intellectual-property details, financial statements and information on the team and milestones. Check that names, registration numbers and dates match across every document, and describe your own business accurately rather than reusing generic wording from another application.

For the IMB application, organise the recognition certificate, evidence of the eligible business and the financial information requested on the portal. Keep a log of clarification requests and responses, and retain the final submitted version. Keep the Startup India profile consistent with your incorporation records and accounts if the business or ownership changes.

What does recognition unlock beyond the tax holiday?

Recognition gives access to fast-tracked patent examination, a rebate on patent filing fees, the Startup India Seed Fund Scheme through participating incubators, self-certification under specified labour and environmental laws, public-procurement relaxations and many state startup schemes. Each has its own conditions, and recognition does not guarantee approval, funding or a patent grant.

Fast-tracked examination speeds up the patent process but does not decide whether a patent will be granted. Assess patentability with a patent professional before public disclosure, and check the current IP India rules for the applicable concessions and documentation.

For seed funding and state schemes, match the stage of the business to each programme’s objectives and permitted uses. Disclose any previous support accurately. Check current availability on official portals and with participating incubators, since selection and disbursement remain specific to each programme.

What should a recognised startup keep doing after approval?

After recognition, a startup should keep its Startup India profile, incorporation records and financial statements consistent, and continue all normal company or LLP, GST, income-tax and labour compliance. Recognition is a status, not an exemption from routine filings, and it lapses automatically once the age or turnover limit is crossed.

Track the dates that matter each year: the age of the entity against the 10-year or 20-year limit, turnover against the ₹200 crore or ₹300 crore limit, and, separately, turnover against the ₹100 crore condition for any year in which the tax holiday is claimed. Note when the IMB certificate was issued and which years are chosen for the deduction.

Reassess eligibility before any restructuring, merger, change in business or transfer of the undertaking, since these can affect both recognition and the tax holiday. Keep evidence of how each benefit was used, so that the startup can answer questions from the tax department, incubators or investors during later reviews and due diligence.

Finally, keep the authorised representative’s login details secure and current. Portal notices, clarification requests and certificate downloads all go to the registered contact, and an unanswered query can delay recognition or the IMB application. Assign responsibility for monitoring the portal and recording each response, so that the startup’s records stay complete when team members change.

How do DPIIT recognition and the section 140 tax holiday compare?

How do you apply for DPIIT recognition and the tax holiday?

1. Check eligibility

   Confirm the entity type, date of incorporation or registration, turnover history and that the business was not formed by splitting up or reconstructing an existing business. Assess deep-tech classification separately if relevant.

2. Prepare the documents

   Collect the incorporation certificate, PAN, director or partner details, authorisation and a business write-up showing innovation or scalability, with supporting product and financial material.

3. Register on Startup India and apply

   Create the entity profile on startupindia.gov.in, complete the recognition application and declarations, and respond to any clarification request with documented facts.

4. Receive the recognition certificate

   Once DPIIT approves the application, download the recognition certificate and keep the profile updated if business details change.

5. Apply to the Inter-Ministerial Board

   If the company or LLP meets the section 140 conditions, apply for the IMB certificate and plan which three consecutive years within the first ten to claim the deduction.