Tax Saving for Business Owners – FY 2025-26
With the new tax regime now default and several new provisions active, business owners in India have both new challenges and new opportunities for tax savings. Here are 7 powerful, legal strategies.
Strategy 1 – Evaluate Old vs New Regime Every Year
Do NOT assume the old regime is better. With the new regime's ₹12 lakh zero-tax benefit and no requirement to invest in 80C instruments, many business owners save more under the new regime.
✅ Use the Income Tax Department's free online calculator at incometax.gov.in/iec/foportal
Strategy 2 – Maximize Presumptive Taxation (44AD/44ADA)
For FY 2025-26, revised limits apply: - Section 44AD (Small businesses): Turnover up to ₹3 crore (digital receipts up to ₹3 crore) - Section 44ADA (Professionals): Gross receipts up to ₹75 lakhs
No books of accounts required. Declare 8% (or 6% for digital receipts) of turnover as profit and file a simplified return.
Strategy 3 – Pay MSME Vendors Before Year-End (Section 43B(h))
Critical 2026 Rule: Payments to MSME (micro & small) registered vendors must be made within the credit period (or 45 days max). If not paid, the expense is disallowed in the current year's tax calculation.
✅ Check your vendor's MSME status on udyamregistrar.gov.in before year-end
Strategy 4 – Claim New Capital Allowances
- New machinery for manufacturing: 40% additional depreciation in the year of purchase
- Intangible assets (software, patents): 25% depreciation
Strategy 5 – NPS Corporate Contribution (Section 80CCD(2))
Your company can contribute up to 14% of employee salary to NPS and claim it as a business expense. This is a deduction available even under the new tax regime – making it one of the most powerful tax tools in 2026.
Strategy 6 – Restructure Salary with Tax-Free Components
For sole proprietors and directors, restructure remuneration to include: - Leave Travel Allowance (LTA) – 2 trips in 4-year block - Meal coupons – ₹50/meal (tax-free) - Phone/Internet reimbursement – up to ₹24,000/year - Car + driver allowance for business use
Strategy 7 – Advance Tax Planning to Avoid Interest
Pay advance tax by due dates to avoid 1% per month interest under Sections 234B and 234C:
· Instalment · Due Date · % of Tax · · --- · --- · --- · · 1st · 15th June 2026 · 15% · · 2nd · 15th September 2026 · 45% · · 3rd · 15th December 2026 · 75% · · 4th · 15th March 2027 · 100% ·
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Is Section 43B(h) applicable to all MSME payments?
Yes, payments to micro and small enterprises must be made within the agreed credit period (max 45 days), or the deduction is disallowed.
What is the presumptive taxation turnover limit for FY 2025-26?
Under Section 44AD, the limit is ₹3 crore for businesses and ₹75 lakhs for professionals under 44ADA.
Can I claim NPS deduction under the new tax regime?
Yes, employer contributions to NPS under Section 80CCD(2) are deductible even under the new tax regime.