Business Income Tax in India: The Complete Guide for MSMEs by StartupFloray

What is Business Income Tax?

Business income tax is the tax you pay on the profits your business makes. In India, whether you run a shop, startup, consultancy, or factory, if you’re earning money, the government wants a share.

If you’re a company, you pay corporate income tax.

If you’re a partnership, LLP, or proprietor, your business income is taxed as part of your personal income.

Note: If your business is earning, you’ll likely pay some tax—but there are smart ways to save.

Who Pays Business Income Tax in India?



All businesses—big or small—are required to pay tax on their profits. This includes:

Proprietors (single owners)

Partnerships and LLPs

Private Limited Companies

Startups




Q: Do businessmen pay income tax?


Yes! If you earn profits, you pay taxes. But, there are ways to reduce or delay tax legally.

When Was Income Tax Introduced in India?


Income tax has a long history in India. It was first introduced in 1860 by Sir James Wilson, to meet the British Raj’s financial needs after the 1857 rebellion.

Is There Any Tax-Free Period for New Businesses?

Yes! This is where things get interesting for startups.

No Tax for 3 Years: The 80 IAC Advantage

Under the 80 IAC of the Income Tax Act, eligible startups can get 100% tax exemption on profits for 3 consecutive years out of their first 10 years.

Who qualifies? DPIIT-recognized startups working on innovation, new products, or technology.

How to apply? Register your startup with DPIIT and then apply for 80 IAC approval through the Income Tax portal.

Get an 80 IAC consultation: StartupFlora Business Consultancy offers this service in India—reach out for help!

Q: Which business is tax free in India?
No business is 100% tax free forever, but certain startups can enjoy “no tax for 3 years” under 80 IAC.

Business Income Tax Rates in India

The rates vary, depending on your business structure:

Proprietorship & Partnership: Slab rates (just like individual tax)—higher income, higher tax.

Private Limited Company:

25% (for turnover up to ₹400 crore) + surcharge & cess

15% (for new manufacturing companies, subject to conditions)

Startups (80 IAC): 0% for 3 years (if approved!)

What is Business Income in Income Tax?

Business income means all profits from your business—after deducting expenses like salaries, rent, raw material, electricity, etc. You pay tax on the net profit, not your total sales.

Business Income Tax Return: Which Form to Use?

ITR 3: Proprietorship/partnership with income from business/profession.

ITR 5: Partnership firm/LLP.

ITR 6: Companies.

ITR 7: For charitable/religious trusts.

StartupFlora Business Consultancy can help you choose and fill the right form for your business in India.

3 Types of Business Taxes in India

Income Tax (on profits)

GST (on sales of goods/services)

TDS (tax deducted at source)

How Many Years Can Income Tax Go Back in India?

The income tax department can generally reopen cases up to 6 years back, and in some special cases, up to 10 years.

Will Income Tax Be Abolished in India?

Unlikely! Income tax is a major source of government revenue. While slab rates and exemptions may change, income tax is here to stay.

80 IAC Consultation & Registration in India

StartupFlora Business Consultancy specializes in 80 IAC consultation and registration for startups in India. If you think your business might qualify for the “no tax for 3 years” benefit, reach out today for an eligibility check and hassle-free application process.

Frequently Asked Questions (FAQs)

Q1. What is business income tax?

Business income tax is the tax you pay on your business profits after deducting expenses. All businesses, big or small, must pay this tax as per Indian law.

Q2. What is corporate income tax?

Corporate income tax is the tax paid by registered companies on their net profits. The rate is usually 25% for most companies.

Q3. What is 80 IAC of the Income Tax Act?

80 IAC gives approved startups a 3-year tax holiday. Your business pays zero income tax for any 3 years out of your first 10 years—if you meet certain conditions.

Q4. Do all businesses have to pay income tax?

Yes, unless you qualify for special exemptions like 80 IAC. Otherwise, all profits are taxable.

Q5. How do I register for 80 IAC?

Get DPIIT recognition as a startup.

Apply online via the Income Tax portal with all required documents.

Consult StartupFlora Business Consultancy in India for help.

Q6. Are there any businesses that are completely tax free?

No business is tax free forever. But startups can enjoy up to 3 years of no tax if approved under 80 IAC.

Q7. What is the business income tax rate in India?

For individuals and partnerships, it’s based on income slabs. For companies, it’s 25%. Startups (approved under 80 IAC) pay 0% for 3 years.

Q8. Do businessmen have to file income tax returns?

Yes. Every business owner must file income tax returns every year, using the right form (ITR 3, 5, 6, etc.).

Q9. Can I consult StartupFlora Business Consultancy for 80 IAC and business income tax?

Absolutely! StartupFlora Business Consultancy is your trusted partner in India for all tax-related services—including 80 IAC registration and business income tax filing.

Final Word

Business taxes in India don’t have to be confusing. With the right advice, you can save money, avoid penalties, and focus on growing your business. Whether you’re a young startup founder, an established MSME owner, or planning a business vacation, StartupFlora, Lalkothi Jaipur has your back.

Want to check if you qualify for “No Tax for 3 Years”? Need help with your income tax return?
Contact StartupFlora, Lalkothi Jaipur, for a free 80 IAC consultation and Tax Exemption today!