Sole proprietorship or company in India: tax comparison
Taxes and contributions for a sole proprietor under each available system and for your own company, for a resident of the chosen country with the same profit.
Profit (receipts minus expenses) is the owner's income, taxed at the section 202 slab rates of 0–30% plus 4% cess. Income up to INR 12 lakh is tax-free thanks to the section 156 rebate.
Conditions
GST: registration is required once annual turnover from services exceeds INR 20 lakh (2 million); GST is not included in the calculation.
Sole proprietorSole proprietorship — presumptive taxation of professions (Income-tax Act, 2025, section 58(2), Table Sl. No. 3; former section 44ADA)
Income is deemed to be 50% of gross receipts whatever the actual expenses (a higher amount may be declared voluntarily); detailed expense records are not needed. The section 202 slab rates and 4% cess then apply.
Conditions
Only for resident individuals (and firms other than LLPs) in the specified professions of section 62(4), which include information technology and technical consultancy.
Gross receipts limit: INR 75 lakh (7.5 million) if cash receipts are no more than 5%; otherwise INR 50 lakh. The calculation assumes clients pay by bank transfer.
GST: registration is required once annual turnover from services exceeds INR 20 lakh (2 million); GST is not included in the calculation.
CompanyPrivate limited company / One Person Company (Companies Act, 2013) — tax under section 200 of the Income-tax Act, 2025
The company pays 22% tax + 10% surcharge + 4% cess (25.168% of profit in total). Dividends are added to the owner's income and taxed at the section 202 slab rates.
Conditions
A private company needs at least two members; a single owner uses a One Person Company (OPC). The tax is the same.
The 22% rate (section 200) must be opted for by the return due date; the company then gives up incentives and deductions, and the option cannot be withdrawn.
The company withholds 10% TDS from dividends; it is credited against the owner's tax. Surcharge on dividends is capped at 15%.
GST: registration is required once annual turnover from services exceeds INR 20 lakh (2 million); GST is not included in the calculation.
The LLP pays 30% of profit (+12% surcharge if profit exceeds INR 1 crore) and 4% cess. The partner's share of LLP profit is exempt.
Conditions
An LLP needs at least two partners; the second partner may hold a small share.
Remuneration and interest paid to working partners within the statutory limits reduce the LLP's profit and are taxed in the partner's hands; they are not included here.
An LLP cannot use the section 58 presumptive scheme.
GST: registration is required once annual turnover from services exceeds INR 20 lakh (2 million); GST is not included in the calculation.
Business activity: IT and consulting services for business clients
One owner, resident and ordinarily resident in India, no employees, no other income, no children; full tax year 2026-27 (1 April 2026 – 31 March 2027); New Delhi (no professional tax).
Individual tax under the default section 202 regime without deductions; section 156 rebate of up to INR 60,000 for income up to INR 12 lakh; surcharge with marginal relief; 4% Health and Education Cess.
The owner pays no mandatory social contributions (EPF covers employees only). GST is not included.
Company and LLP: the owner takes no salary or remuneration; the company has opted for section 200 (22%); profit after tax is either fully paid out as dividends or retained.
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