Startup India in 2026: who qualifies, what recognition gives you, and the tax holiday most founders never claim

The Department for Promotion of Industry and Internal Trade recognises an entity as a start-up if it meets all of the following:

• It is a private limited company, a limited liability partnership or a registered partnership firm. Proprietorships and unregistered firms do not qualify.
• Not more than ten years have passed since incorporation.
• Turnover has not exceeded ₹100 crore in any financial year since incorporation.
• It is working towards innovation, development or improvement of products, processes or services, or has a scalable business model with high potential for employment or wealth creation.
• It was not formed by splitting up or reconstructing an existing business.

The application is made on the Startup India portal with the incorporation certificate, a description of the business, and supporting material such as a website, pitch deck or product video. Recognition is usually granted within days and costs nothing. The description is where applications are returned: it must explain what is new or improved, not what the company sells.

Self-certification. Compliance with six labour laws and three environment laws by self-declaration, with no inspection for three to five years unless a credible complaint is received.

Intellectual property. An 80 percent rebate on patent filing fees and 50 percent on trade mark fees, expedited examination of patents, and a panel of facilitators whose fees the government bears for the filing stage. For a company building a brand or a product, this is the benefit with the fastest payback.

Public procurement. Exemption from prior-experience, prior-turnover and earnest money deposit conditions on the Government e-Marketplace and in central procurement, subject to quality standards.

Easier exit. A recognised start-up with simple debt structures can be wound up within 90 days of applying under the insolvency code, against 180 days for other companies.

Funding access. Eligibility to be considered by funds supported by the Fund of Funds for Startups and by the Startup India Seed Fund Scheme through incubators, and access to the credit guarantee scheme for start-up loans.

Angel tax is gone for everyone. The tax on share premium above fair value under section 56(2)(viib) was abolished from assessment year 2025-26 for all companies, so it is no longer a reason to seek recognition, though older literature still lists it.

Section 80-IAC allows an eligible start-up a deduction of 100 percent of its profits for any three consecutive years, chosen by the start-up, out of the first ten years from incorporation. The conditions are stricter than DPIIT recognition:

• The entity must be a private limited company or an LLP; partnership firms are excluded.
• It must have been incorporated on or after 1 April 2016 and before 1 April 2030. The Union Budget for 2025-26 extended the earlier cut-off of 1 April 2025 by five years.
• Turnover must not exceed ₹100 crore in the year the deduction is claimed.
• It must hold a certificate of eligibility from the Inter-Ministerial Board, obtained by a separate application through the Startup India portal after recognition.

The Board examines whether the business is genuinely innovative and scalable, and rejects applications that read as ordinary trading or services businesses with a website. DPIIT has committed the Board to a decision within 120 days. Founders should apply once there is a product, revenue and something to show, and should plan which three years to claim: the deduction is worth most in the years profits are highest, and the ten-year window closes regardless.

Income earned from 1 April 2026 is taxed under the Income-tax Act, 2025, which carries the same start-up deduction under a new section number. The conditions and the IMB certificate requirement continue.

Loss carry-forward despite shareholding change. Ordinarily a company loses its accumulated losses if more than 49 percent of its voting power changes hands. An eligible start-up keeps them for losses incurred in its first ten years, as long as all the shareholders at the time of the loss continue to hold shares in the year of set-off. Investor rounds do not wipe out the losses.

ESOP tax deferral for employees. Employees of an eligible start-up holding an IMB certificate may defer the tax on exercised options for up to five years, or until they leave or sell the shares, whichever is earlier. The company deducts and deposits the tax at that later date.

Recognition is refused where the write-up describes the market rather than the innovation, where the entity is a services firm with no product or process claim, or where the founders previously ran the same business in another entity. It is withdrawn where it was obtained on false information.

Recognition does not exempt a company from GST, from the Companies Act filings, from TDS or from labour registrations; self-certification changes how compliance is verified, not whether it applies. It does not bring funding by itself, and the 80-IAC deduction is not automatic. Founders who plan around the tax holiday before the IMB certificate exists are planning around money they may not get.

Applications are made on the Startup India portal. Our DPIIT recognition service drafts the innovation write-up, files the recognition, and prepares the IMB application when the business is ready for it.