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Startup Tax Exemption

DPIIT recognition by itself changes nothing on your tax return. The exemptions are separate applications, and they are considerably harder.

Recognition and exemption are two different things

This is the single most common misunderstanding we see. A founder gets recognition, assumes the tax holiday follows, and files accordingly. It does not.

Recognition makes you eligible to apply. The profit-linked deduction is a separate application to a separate body, assessed against stricter criteria, and a significant share of applications are not approved. Plan on the basis of your ordinary tax position and treat approval as upside.

The two exemptions people mean

What it doesWhat it needs
Profit-linked deductionA deduction on profits for a set number of years out of the early years of the businessA separate application to an inter-ministerial body, incorporation within the prescribed window, and a case on innovation and scalability. Approval is not routine
Exemption on share premiumRelief from tax on consideration received above fair market value on issue of sharesA separate declaration and conditions, including limits on what the funds may be invested in

Both sit on top of recognition. Neither is automatic, and the conditions attached to the second one restrict what you may do with the money afterwards - which is worth reading before relying on it.

Written 5 September 2026. Government requirements and portal behaviour change — message us to confirm before you rely on any date or figure here.

What we would advise

Get recognition if you qualify — it is free and it opens doors on procurement and scheme access. Apply for the deduction if the business genuinely fits, with a proper case rather than a form.

But do not build a financial plan on an exemption you have not received. Founders have committed spending against an expected tax holiday and then had to fund the tax as well. Keep the two separate until one of them is in writing.

Common questions

No. Recognition alone gives no tax relief. The deduction is a separate approval and many applications are not granted.

If the business genuinely has an innovation case and the numbers justify the effort, yes. Send us the picture and we will be straight about the odds.

A profit-linked deduction needs profits. The years it applies to are chosen, so the timing matters.

An inter-ministerial body, not the recognition portal. That is why the two outcomes differ.

Send us your case

Tell us your incorporation date, turnover and what makes the business different. That decides whether it is worth applying.

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