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Income Tax Guide for Startups & Small Businesses

Compliance Guide

Income Tax for Startups & Small Businesses in India


Business Structure & Tax Rates

StructureTax RateSurcharge
ProprietorshipIndividual slab rates (5-30%)As applicable
Partnership/LLP30% flat12% if income > ₹1 crore
Pvt Ltd Company (new mfg, started by 31 March 2024)15% (Section 115BAB, closed to later units)10%
Pvt Ltd Company (others)22% (Section 115BAA)10%

Startup India Tax Exemption (Section 80-IAC)

  • DPIIT-recognized startups can claim 100% tax exemption on profits
  • Available for 3 consecutive years out of first 10 years from incorporation
  • Turnover should not exceed ₹100 crore in the relevant year
  • Must apply through the Inter-Ministerial Board via Startup India portal

    • Key Deductions for Small Businesses

  • Section 80C: EPF, LIC, ELSS, up to ₹1.5 lakh (proprietorship)
  • Depreciation: On computers (40%), furniture (10%), vehicles (15%), buildings (10%)
  • Business expenses: Rent, salaries, utilities, raw materials, marketing
  • Presumptive taxation (Section 44AD of the 1961 Act, carried into the Income-tax Act, 2025 from 1 April 2026). For businesses with turnover up to ₹2 crore, or ₹3 crore if cash receipts are within 5 percent of total receipts. Declare 6 to 8 percent of turnover as profit, no books of accounts required
  • Section 44ADA. For professionals with receipts up to ₹50 lakh, or ₹75 lakh if cash receipts are within 5 percent. Declare 50 percent as profit

    • Advance Tax

  • Pay tax in quarterly installments if annual tax liability exceeds ₹10,000
  • Due dates: 15th June (15%), 15th Sep (45%), 15th Dec (75%), 15th Mar (100%)
  • Interest under Section 234B/234C for non-payment or short payment

    • TDS Compliance

  • Deduct TDS on salaries, rent, professional fees, contractor payments
  • File TDS returns quarterly (Form 24Q, 26Q)
  • Issue Form 16/16A to deductees

    • Key Deadlines

    FilingDue Date
    ITR (non-audit)31st July
    ITR (audit cases)31st October
    Tax Audit Report30th September
    TDS ReturnsQuarterly (31 Jul, 31 Oct, 31 Jan, 31 May)
    Advance Tax15 Jun, 15 Sep, 15 Dec, 15 Mar

    Key Takeaways

    • Most companies pay 22 percent under the concessional regime, the old 15 percent manufacturing rate closed to units starting after 31 March 2024
    • Startup India provides 100% tax exemption for 3 years (apply through DPIIT)
    • Presumptive taxation (Section 44AD) simplifies compliance for turnover up to ₹2 crore, or ₹3 crore if cash receipts stay within 5 percent
    • Advance tax quarterly payments mandatory if annual tax exceeds ₹10,000
    • File ITR by 31st July (non-audit) or 31st October (audit cases)

    Official Links

    Income Tax PortalStartup India Tax Exemption

    Related Business Ideas

    Digital Marketing AgencyApp Development

    Related Government Schemes

    Startup IndiaUdyam Registration

    Disclaimer

    This guide is provided for informational and educational purposes only. EduMetrics is not a legal, tax, or financial advisor. Regulations, procedures, and fees are subject to change. Please verify all information on the respective official portals and consult a qualified professional before taking any action.