More Indian start-ups benefit from tax exemption scheme

The Indian government has approved a tranche of 187 start-ups for tax exemption under the revamped Section 80 of the IAC framework.

With the latest approvals by the Department for Promotion of Industry and Internal Trade (DPIIT) more than over 3,700 Indian start-ups have now benefited from the scheme since its launch.

The tax exemption initiative – under the revamped Section 80-IAC of the Income Tax Act – aims to provide fiscal relief for emerging businesses, encouraging innovation and supporting job creation across the country.

In a statement, the DPIIT said latest the approvals came during the 79th and 80th meetings of the Inter-Ministerial Board (IMB), with 75 start-ups cleared in the 79^th meeting and 112 in the 80^th.

Under the revised framework, eligible start-ups can claim a 100% income tax deduction on profits for any three consecutive years within a 10-year period from their date of incorporation. The Union Budget 2025–26 extended the eligibility window, allowing start-ups incorporated up to 1 April 2030 to claim the benefit.

To qualify, start-ups must be recognized by the DPIIT, operate as a private limited company or limited liability partnership, and have an annual turnover not exceeding Rs 100 crore (£8.76m) in any previous financial year.

The DPIIT has also simplified and sped up the application process, ensuring that complete applications are reviewed within 120 days. Start-ups that were not approved in the latest round are encouraged to review and strengthen their applications, focusing on technological innovation, market potential, scalability, and their contribution to employment and economic growth.

“These steps underline the government’s ongoing commitment to nurturing a vibrant, innovation-led start-up ecosystem in India,” the DPIIT said.

The government has also doubled the guarantee cover under its Credit Guarantee Scheme for Startups (CGSS), raising the limit per borrower from Rs 10 crore to Rs 20 crore, a move aimed at easing credit access for start-ups and driving innovation in priority sectors.

The revised scheme also increases the guarantee cover to 85% for loans up to Rs 10 crore and 75% for loans above that threshold. The government is positioning the expanded coverage as a way for start-ups to secure working capital, term loans and venture debt, key to sustaining R&D and product development.

As of December 2024, the DPIIT had recognized 157,000 entities as start-ups. Since the launch of the Startup India initiative on 16 January 2016, these start-ups have generated over 1.55 million direct jobs, according to government figures.

Industry experts have welcomed the move. “This will give start-ups much-needed breathing room to innovate and scale up without the immediate pressure of tax burdens,” said Vinod Kumar, president, India SME Forum.

“Combined with improved access to credit, these measures create a supportive environment that can help Indian start-ups compete globally.”

India ‘must speed up merger process’

India’s regulatory frameworks must facilitate swift and seamless approvals for mergers (or combinations) that pose no harm to competition, while also maintaining rigorous oversight, Finance Minister Nirmala Sitharaman has said.

Speaking at the recent 16th Annual Day of the Competition Commission of India (CCI), Sitharaman said: “Delays in regulatory clearances can lead to uncertainty, disrupt commercial timelines, and potentially erode the intended value of transactions.”

The CCI allows automated approval for combinations that are deemed to have no appreciable adverse effect on competition in order to reduce transaction costs and timelines for benign mergers and acquisitions under its green channel mechanism.

“Regulators must be guided by the principle of ‘minimum necessary, maximum feasible’ in order to balance regulatory vigilance with a pro-growth mindset,” Sitharaman said.

The Finance Minister said that the ability of the antitrust watchdog to strike a balance between regulatory vigilance and a pro-growth mindset will be integral to building a resilient, equitable and innovation-driven economic framework in India.

“In an export-challenged, environment-challenged, energy-challenged, and emissions-challenged world, the increased reliance on domestic growth levers requires ensuring the right balance of regulation and freedom,” she added.