Summary: For the tax year 2025-26, a manufacturing business owner like Mr. Ram, operating a spare parts venture in Jaipur since April 1, 2023, faces a critical decision regarding business structure: proprietorship versus company. The optimal choice depends on turnover and net profit. In a scenario with ₹5 Crore turnover and ₹1 Crore net profit, a company structure opting for Section 201 (115BAB) at a 17.16% concessional tax rate is more tax-efficient, resulting in a net saving of ₹10,85,520 compared to a proprietorship under the new tax regime. However, if the business has a ₹1 Crore turnover and ₹20 Lacs net profit, a proprietorship under the new tax regime proves more beneficial, saving ₹2,10,200, primarily due to lower tax liabilities despite higher compliance costs associated with a company structure. Companies generally incur higher compliance costs, which need to be factored into the decision. Certain deductions are not permissible under the concessional tax regimes for both proprietorships and companies, including specific allowances, interest on house property, and deductions under various sections like those related to scientific research, specified business capital expenditure, and SEZ units. The choice of Section 201 (115BAB) for companies, once made, is irreversible.
1. (Taxation Perspective for Manufacturing Businesses for Tax Year 2025-26)
Mr. Ram runs a manufacturing business of Spare Parts since 01st April 2023 in Jaipur. He’s Confused about whether to choose : Proprietorship or Company ? Let’s Compare with two scenarios (in ₹)
| Particular | Case Scenario 1 | Case Scenario 2 |
| Turnover | ₹ 5 Crore | ₹ 1 Crore |
| Net-Profit | ₹ 1 Crore | ₹ 20 Lacs |
| Proprietorship | Concessional Tax Rates (Assumption : New Tax Regime u/s 202) chosen
₹ 29,51,520 (Table 1) |
Company can opt for Sec 58 (44AD of Income Tax Act,1961)
₹ 6,00,000 (₹ 1 Crore * 6%) *Assuming all receipts realized through banking channel Alternatively If Concessional Tax Rates (Assumption : New Tax Regime u/s 202) chosen ₹ 2,08,000 (Table 1) Since Concessional Tax Rate is beneficial thus Sec 58 not opted |
| Company | Company can opt for Section 201 (115BAB of Income Tax Act,1961)
₹ 17,16,000 ( ₹ 1 Crore*17.16%) |
Company can opt for Section 201 (115BAB of Income Tax Act,1961)
₹ 3,43,200 ( ₹ 20 Lacs*17.16%) |
| Additional Compliance Cost | ₹ 1,50,000
(Usually Compliance cost is higher in Companies as Compared to Proprietorship) |
₹ 75,000
(Usually Compliance cost is higher in Companies as Compared to Proprietorship) |
| Net Saving | ₹ 10,85,520
(Company formation is beneficial as it can save ₹ 10,85,520) |
(₹ 2,10,200)
(Proprietorship is beneficial If Concessional Tax Rates chosen because it can save ₹ 2,10,200) |
we can easily save amount legally up to ₹ x,xx,xxx by choosing right business structure (Tax Planning) for the entity.
Every business is unique. Let me help you find the most profitable and compliant structure for yours.
DM or comment your turnover & key details — I’ll respond with the best-fit structure!
Table 1: Concessional Tax Rate Calculation
| Sr no. | Total Income | Tax Rate | Tax Amount (CS 1) | Tax Amount (CS 2) |
| 1 | Upto ₹ 4,00,000 | Nil | 0 | 0 |
| 2 | From ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000.00 | ₹20,000.00 |
| 3 | From ₹8,00,001 to ₹12,00,000 | 10% | ₹40,000.00 | ₹40,000.00 |
| 4 | From ₹12,00,001 to ₹16,00,000 | 15% | ₹60,000.00 | ₹60,000.00 |
| 5 | From ₹16,00,001 to ₹20,00,000 | 20% | ₹80,000.00 | ₹80,000.00 |
| 6 | From ₹20,00,001 to ₹24,00,000 | 25% | ₹100,000.00 | NA |
| 7 | Above ₹24,00,000 | 30% | ₹2,280,000.00 | NA |
| Total Tax | ₹2,580,000.00 | ₹200,000.00 | ||
| Surcharge @ 10% | ₹258,000.00 | NA | ||
| Health and Education Cess @ 4 % | ₹113,520.00 | ₹8,000.00 | ||
| Tax Payable | ₹2,951,520.00 | ₹208,000.00 | ||
Notes :
1.Sections and Provisions are as per The Income Tax Bill,2025.
2. If Company opts for Sec 201 (115BAB) Concessional Tax Rates for domestic companies @ 17.16% then it shall not be subsequently withdrawn for the same or any other tax year. Once Opted applicable for life-time no subsequent withdrawals.
Following deductions are not allowed in case of Concessional Tax Regime:-
Notes :
1.Sections and Provisions are as per The Income Tax Bill,2025.
2. If Company opts for Sec 201 (115BAB) Concessional Tax Rates for domestic companies @ 17.16% then it shall not be subsequently withdrawn for the same or any other tax year. Once Opted applicable for life-time no subsequent withdrawals.
Following deductions are not allowed in case of Concessional Tax Regime:-
| Proprietorship | Company |
| 1. Schedule III (Table: Sl. No. 5 or 6 or 7 (MP,MLA Allowances or 8 (Leave Travel Concession or 11(House Rent Allowance) or 17(Children Education Allowances) and Sec 19(1) Professional Tax
2. Interest Payable on House Property u/s 22(1)(B) and Loss from House Property 3. Expenditure on agricultural extension u/s 47(1)(a) 4. Chapter-VII Deductions (Chapter VI deductions) Except Sec 124(1) (80CCD) ,125(3) (80CCH and Sec 146 (80JJAA) 5. Sec 33(8) Additional Depreciation 6. Sec 45(3) (Section 35) Expenditure on Scientific Research 7. Section 46 (Sec 35AD) Capital Expenditure of Specified business 8. Sec 48 (Sec 33AB) Tea development account, coffee development account and rubber development account 9. Sec 49 (Sec 33ABA) Site Restoration Fund 10. Sec 144 (10AA) SEZ units |
11. Expenditure on agricultural extension and skill development project u/s 47
12. Chapter-VII Deductions (Chapter VI deductions) Except Sec 146 (80JJAA) and Sec 148 (80M) 13. Sec 33(8) Additional Depreciation 14. Sec 45(3) (Section 35) Expenditure on Scientific Research 15. Section 46 (Sec 35AD) Capital Expenditure of Specified business 16. Sec 48 (Sec 33AB) Tea development account, coffee development account and rubber development account 17. Sec 49 (Sec 33ABA) Site Restoration Fund 18. Sec 144 (10AA) SEZ units |
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