Tax implications while setting up a small time startup in India

Best Setup: Private Limited Company (from April 2026)

• Tax Rate: 25% plus 7–12% surcharge and 4% cess (applicable where turnover ≤ ₹400 Cr) 

• Benefits:

  • Lower than personal slab rate (30%+).

  • You can pay yourself and your wife reasonable salaries (deductible expense).

  • Corporate structure supports future growth.

Example structure:

• Employee salary: ₹20 L

• Your salary: ₹70 L

• Spouse salary: ₹10 L → reduces taxable profit

• Profit remaining: ₹40 L → taxed at ~25% = ₹10 L

• Compliance & audit: ~₹1–1.5 L

• Total tax + opex ~ ₹11.5 L, within your ₹20 L budget

 Why Not Alternatives?

1. Proprietorship/Partnership/LLP: Taxed at 30%+ with no corporate benefits. 44ADA doesn’t apply to these for ₹1.4 Cr turnover.

Option 1: Continue with the UAE company till 31.03.2028

Personal taxation

- For F.Y. 2025-26 - Your residential status would be NRI. Also assuming your stay in India during F.Y. 2025-26 would be less than 60 days. In such a scenario, only Indian income would be taxable in India

- For F.Y. 2026-27 & 2027-28 - Your residential status may be RNOR and income would be calculated accordingly

Corporate taxation : Foreign Co. having turnover less than Rs.50 Cr in a previous year is always treated as non-resident.

Option 2:

Incorporation of a new Company in India

Personal taxation

- Section 44ADA is applicable to a resident professionals having gross income less than Rs.75 lacs

- Income is taxable at slab rates

Corporate taxation

- Tax rate is 26% on the net profit

1. Operational expenses for new setup in India can be managed under Rs.20L

2. As there are no plans for further expansion, keep the business constitution structure as Proprietorship instead of a Private Limited Company

3. If take home is more than Rs.75L then benefit of section 44ADA is not applicable. Your spouse can also provide services to your Co.

4. For turnover more than Rs.20L p.a., GST registration and filing of returns is mandatory

For detailed discussion you may opt for phone consultation

Hi,

You're right — the earlier estimate didn’t include personal tax on your ₹70L salary, which would push the total cost well beyond ₹20L.

To stay within ₹20L total tax + compliance, here's the most practical structure:

FY 2026–27: RNOR Status

• Keep using your UAE company.

• Foreign income not taxable unless received in India.

FY 2027–28 Onwards: Lean Proprietorship

• Register under your name with GST.

• Keep your net taxable income under ₹60–65L by:

  • Paying spouse ₹10–15L

  • Using deductions (80C, 80CCD, etc.)

• No 44ADA (crosses ₹75L), but lowest cost setup.

• Tax + basic compliance can be kept within ₹18–20L.

If future expansion comes in, we can shift to Pvt Ltd later.

Let me know if you want a custom plan based on your ITR & UAE setup.

Best,
CA Shubham Goyal