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80-IAC benefit calculator

What the startup tax holiday is actually worth once minimum tax is accounted for — and what you give up to take it.

Eligibility
Saved immediately₹15.60 LTax you simply do not pay — ₹5.20 L in each of the three holiday years. Yours as cash, nothing to claim back.
MAT you still pay₹23.40 LNot a cost — a rebate you claim later. It becomes a credit under s.115JAA that you set off against future tax bills for up to 15 years, once the holiday ends and you are paying full rates again.

Up to ₹39 L in all if the credit is fully used — 40% off your tax bill in each of the three years either way. That makes 80-IAC the cheapest of the three routes open to you: ₹4.78 L a year less than the 22% regime, which you would have to give up 80-IAC to take. The credit comes back only if you later earn enough for ordinary tax to exceed minimum tax, and it lapses after 15 years. The left-hand figure carries no such condition.

Scenario
Tax you pay
Company, no 80-IAC claim
₹13 L
Company, claiming 80-IAC this is the minimum tax, not zero
₹7.80 L
The difference
What you keep
Cash saved, per exempt year
₹5.20 L
Recoverable later, per yearthe MAT you pay, back as credit
₹7.80 L
Across all 3 exempt years₹15.60 L in cash, plus ₹23.40 L recoverable
up to ₹39 L

How the MAT figure is built

  1. Profit the rate applies to₹50 L
  2. × 15% minimum tax₹7.50 L
  3. + 4% cess₹30,000
  4. MAT, s.115JB (s.206 of the 2025 Act) payable₹7.80 L

How that credit actually comes back

  1. Minimum tax paid this year₹7.80 L
  2. Becomes a credit under s.115JAA₹7.80 L
  3. Usable for15 assessment years

In a later year you set the credit off against the amount by which your ordinary tax exceeds minimum tax — so it returns once the holiday ends and you are paying full rates. Two things decide whether you get all of it: you have to earn enough for that gap to absorb the credit, and it expires after the 15 years. Anything unused at that point is lost.

Does this 15% change if I manufacture, trade or provide services?

No. Minimum tax is 15% of book profit for a domestic company whatever the business does — manufacturing, trading and services are treated identically, and nothing in the section keys off your activity. What actually moves the number is the regime you elect:

  • Electing s.115BAA (22%) or s.115BAB (15%) removes minimum tax entirely — but electing either also surrenders 80-IAC, permanently. s.115BAB is the one restricted by activity: it is for new manufacturing companies only.
  • A company that is a unit in an International Financial Services Centre, earning solely in convertible foreign exchange, pays 9% rather than 15%.
  • An LLP pays AMT instead, at 18.5% of adjusted total income — which is why the entity toggle above changes the figure and your line of business does not.

The rate itself is unchanged by the Income-tax Act, 2025; only the citation moved, from s.115JB to s.206.

Company under s.115BAA (22%): ₹12.58 L. Effective ≈25.17%. Opting in means surrendering 80-IAC — you cannot have both, and the choice is irrevocable.

An estimate, not tax advice. Surcharge slabs, book-profit adjustments and which profits actually qualify all turn on facts a calculator cannot see. Treat this as orientation and confirm your position with your tax adviser before relying on a number.

Why the exemption is never 100% of your tax

80-IAC deducts eligible profits, but minimum tax survives it — MAT at 15% of book profit for a company, AMT at 18.5% of adjusted total income for an LLP. So the cash saved is the gap between your ordinary tax and that minimum, not the whole bill.

There is also a choice most summaries skip: a company can instead opt into s.115BAA at 22% (≈25.17% all in), but doing so means surrendering 80-IAC permanently — the two cannot be combined and the election is irrevocable. During the three exempt years the holiday is normally the better of the two; afterwards the arithmetic can reverse.

DPIIT recognition does not by itself grant the exemption. A separate application is assessed by the Inter-Ministerial Board, and approval rates are well below application volumes.

Want this assessed properly?Recognition is the easy part; the Inter-Ministerial Board application is where most files fail.
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The three things founders get wrong about 80-IAC

Section 80-IAC is the most valuable statutory benefit available to an Indian startup, and also the most over-sold. Three misreadings account for most of the disappointment.

  • “Three years tax-free.” Minimum tax survives the holiday. A company still pays MAT at 15% of book profit; an LLP still pays AMT at 18.5%. The saving is the gap, not the whole bill.
  • “We’ll take the 22% rate as well.” You cannot. Section 115BAA requires surrendering 80-IAC, and the election cannot be reversed in a later year.
  • “Recognition means we have it.” DPIIT recognition only makes you eligible to apply. The Inter-Ministerial Board decides, and it declines a large share of what it sees.

If you are still choosing an entity form, run the calculator on both. The number to compare is not the headline saving — an LLP’s can look larger because its ordinary rate is higher — but the tax you actually end up paying, which a company’s lower minimum-tax floor makes smaller.

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