Corporate Tax Planning

🚨 The Income Tax Act, 1961, is HISTORY! 🚨 After 60+ years, India's tax laws are getting a massive transformation! The Income Tax Bill 2025 brings clarity, simplifies compliance, and encourages digital adoption. Here’s what you MUST know: ✅ 1️⃣ No More AY & PY Confusion! – Say hello to "Tax Year" instead of the complicated Assessment Year & Previous Year system! ✅ 2️⃣ Higher Limits for Businesses & Professionals 📈 44AD (Business): ₹2 Cr ➡ ₹3 Cr 📈 44ADA (Professionals): ₹50 Lakh ➡ ₹75 Lakh ✅ 3️⃣ Housing Loan & Rental Income Updates 🏡 Interest on Housing Loan – Can only be set off against rental income 🏡 Self-Occupied Property – No deduction for housing loan interest 🏡 Loss from Rental Property – Can be adjusted against other rental income but not carried forward ✅ 4️⃣ Exemptions & Allowances Tweaked 💼 HRA (House Rent Allowance) – No exemption allowed! ✈️ Travel & Daily Allowance – Still allowed for official tours/trips 📉 Standard Deduction: ₹75,000 🏦 Employer Contributions (Deduction Eligibility) – 🔹 NPS: Up to 14% of basic salary 🔹 EPF: Up to 12% of basic salary ✅ 5️⃣ Tax Filing Due Dates Extended 🗓️ Tax Audit Filing: Sept 30 ➡ Oct 31 🗓️ ITR Filing: Oct 31 ➡ Nov 30 ✅ 6️⃣ No Change in Capital Gains Tax – LTCG & STCG rates remain unchanged! ✅ 7️⃣ Digital Push for MSMEs – Businesses with up to ₹10 Cr turnover via digital transactions get audit relief! ✅ 8️⃣ CA Exclusive Audit Rights – Despite speculations, only Chartered Accountants can conduct tax audits. Relief for CAs! ✅ 9️⃣ More Sections, Less Complexity – The new law has 536 sections, 23 chapters, and 16 schedules – structured better for easier interpretation! ✅ 🔟 Fewer Pages, More Clarity – From 823 pages (old Act) ➡ 622 pages (new Bill). More concise, yet comprehensive! 💬 Are these changes truly simplifying taxation, or just a rework? Let's discuss! Share your thoughts below! ⬇️ For more insights, follow Pushti Shah #IncomeTaxBill2025 #Finance #Taxation #NewTaxRegime #CharteredAccountants #TaxUpdates

We discussed a 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 called Pass-Through Entity Taxes (PTET). This allows partnerships (1065) and S-corporations (1120S) to 𝐟𝐮𝐥𝐥𝐲 𝐝𝐞𝐝𝐮𝐜𝐭 state and local taxes (SALT), 𝐛𝐲𝐩𝐚𝐬𝐬𝐢𝐧𝐠 the $10,000 cap on Schedule A itemized deductions. Let's break it down with a practical example. Many people were confused and asked common questions that they are 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐧𝐠 state and local taxes (SALT) on federal entity return as business expense already. Whereas I mentioned that SALT 𝐜𝐚𝐧'𝐭 𝐛𝐞 𝐝𝐞𝐝𝐮𝐜𝐭𝐞𝐝 on Forms 1065 or 1120S. Instead, they must be listed on Schedule A, which has a $10,000 capping. However, if they pay SALT at the business level as PTET, then only those can be deducted as a business expense. Let's clear this up. What are Pass-Through Entities? The entity which passes its income/loss to individual 1040 and pays taxes at individual level and 𝐧𝐨𝐭 at business level. Let's say a couple has an S-corporation (1120S) in 𝐈𝐥𝐥𝐢𝐧𝐨𝐢𝐬, and they are Illinois residents. The taxpayer works full-time for this S-corp and earns a net profit of $550,000, while the spouse earns $100,000 from a W-2 job. The $550,000 from the S-corp is passed through the K-1 form to their 1040, and they pay taxes on this income along with the spouse's W-2 income. The taxpayer files both a federal 1040 and an 𝐈𝐥𝐥𝐢𝐧𝐨𝐢𝐬 𝐈𝐋-𝟏𝟎𝟒𝟎 state tax return. Illinois taxes individuals at a 𝟒.𝟗𝟓% rate, so the taxpayer pays $27,225 ($550,000 * 4.95%) on the S-corp income to the 𝐬𝐭𝐚𝐭𝐞. This is considered as, "state income taxes paid by shareholders on their 𝐩𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐫𝐞𝐭𝐮𝐫𝐧𝐬," which can 𝐨𝐧𝐥𝐲 be deducted on Schedule A as an itemized deduction, and up to the $10,000 cap. Here's where the confusion comes in: the law says that “a corporation or partnership can deduct state and local income taxes 𝐢𝐦𝐩𝐨𝐬𝐞𝐝 on the corporation or partnership as business expenses.” What does this mean? Simply put, if a corporation or partnership owns property in a state and pays property taxes on it, these taxes are considered to be imposed on the business. Therefore, they can be deducted as a business expense from their profit and loss on the federal tax return. To sum it all up: "SALT imposed on 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥𝐬 must be listed on 𝐒𝐜𝐡𝐞𝐝𝐮𝐥𝐞 𝐀, with a $10,000 limit. Any taxes directly imposed on a 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 can be deducted as a 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐞𝐱𝐩𝐞𝐧𝐬𝐞 with no capping for federal tax purposes." Some states have found a way around the $10,000 cap. Instead of passing the income to the individual, who would then pay taxes with the $10,000 deduction cap, they allow the taxpayer to pay taxes at the entity level which would be considered imposing tax on business entity. In our example, this would mean paying $27,225 at the entity level, which is fully deductible as a business expense, thus bypassing the $10,000 cap. #cpa #uscpa #learning #taxstrategy #cpafirm #irs #ustax #ustaxation #taxsavings

Think the new $40,000 SALT cap solved your tax problem? Think again. For high-income business owners, the real solution is still the Pass-Through Entity Tax (PTET). Here’s why PTET remains the smarter play even with the higher cap: 1)The $40K SALT cap phases out fast: If your income exceeds $500K (joint), the cap quickly shrinks, often back to the $10K minimum. For high earners, the benefit is minimal or nonexistent. 2) PTET stays fully deductible: The OBBBA did not touch PTET. State income tax paid at the entity level is still fully deductible on the federal return, and that benefit flows to owners regardless of itemizing. 3)Works even if you don’t itemize: Since PTET is deducted before income passes through, you get the federal benefit no matter what. 4)Predictability matters: The $40K cap is temporary (2025 to 2029). PTET remains steady and reliable for long-term planning. 5)State rules differ: PTET elections vary, so you must coordinate with your CPA and review annually. For most high-earning pass-through owners, PTET still delivers far more reliable savings than the new SALT cap ever will. 📌 Bottom line: The SALT expansion helps some, but for high earners with large state tax bills, PTET continues to be the stronger strategy.

Understanding the Pass-Through Entity Tax (PTET) ●Why PTET exists? The 2017 Tax Cuts and Jobs Act (TCJA) limited the federal deduction for state and local taxes (SALT) on individual tax returns to $10,000. This cap affects business owners with pass-through income in high-tax states, as they can’t deduct the full amount of state taxes on their federal return. PTET helps to bypass this cap by allowing the pass-through entity itself to pay the state taxes—which is then deductible at the federal level, effectively reducing federal taxable income for the owners. ● How PTET Works? Under PTET, the pass-through entity pays state tax on the income before it passes to the individual owners or partners. Then, the individual owners or partners: 1. Report the pass-through income from the entity (partnership or S-corp) on their personal tax returns. 2.Claim a credit on their state tax return for the tax the entity paid. This setup can reduce federal taxable income because the business can deduct the state taxes it paid, which reduces the pass-through income reported on the individual’s federal return. ● Example of PTET in Action Scenario: - Imagine a partnership in New York with two partners, Alex and Sam. - The partnership generates $500,000 in income, and New York’s PTET rate is 10%. Steps and Tax Effects: 1. Partnership Pays State Tax: The partnership pays $50,000 (10% of $500,000) in New York PTET. 2. Deduction on Federal Return: The $50,000 PTET payment reduces the partnership’s reported income to $450,000 for federal tax purposes, which is split between Alex and Sam. 3. Pass-Through to Partners: - Alex and Sam each report $225,000 ($450,000 / 2) as income on their federal tax returns, instead of $250,000 each, because the PTET reduced the partnership’s taxable income. - This reduced federal income results in lower federal income tax for Alex and Sam. 4. Credit on State Return: Alex and Sam each receive a PTET credit on their New York state return, offsetting the state tax on their pass-through income. ●Key Benefits of PTET - Federal Tax Savings: The deduction on the federal return reduces taxable income, providing federal tax savings. - Bypassing the SALT Cap: PTET effectively allows full deduction of state taxes for pass-through entity owners, bypassing the $10,000 SALT limit for individuals. ● Potential Considerations - PTET isn’t mandatory, so entities must elect to pay PTET if their state allows it. - Rules and rates vary by state, so it's important to consult state-specific regulations. In short, PTET is a strategy to help pass-through entities reduce the federal tax burden on their owners by shifting state tax payments from personal to entity level, resulting in more favorable federal tax treatment. #taxstrategy #PTET #accounting #taxes #passThroughEntities #business

How to plan for your January 2026 tax bill, without stress Not waiting until December to panic? Revolutionary. Every January, I hear the same thing from new clients: "I didn’t think it would be that much." "My accountant didn’t give me a heads-up." "Is there a payment plan?" Let’s not do that again. Here’s your month-by-month plan to avoid the January 2026 panic: 👇 🟦 August–September 2025 → Get your 2024–25 books up to date → Chase any missing receipts → Check what’s been paid vs what’s owed No point planning for a bill you haven’t calculated. 🟦 October 2025 → Ask your accountant for an estimated tax liability → Check if you’ve set aside enough → If not, adjust your next few months accordingly You still have time to fix things. Use it. 🟦 November 2025 → Ringfence your tax pot → Keep it in a separate account → Set a reminder to not dip into it If you’ve got the money sitting in your main account, it’s already half-spent. 🟦 December 2025 → File your return early → Know the final number → Enjoy your Christmas without HMRC haunting you Early submission = no January surprises. 🟦 January 2026 → Pay the bill → Don’t panic → Start planning next year’s tax from February onwards This isn’t rocket science. It’s just boring systems that make life 10x easier. Most agency owners overcomplicate this. Or ignore it until the last possible moment. Then wonder why January feels like a financial hangover. You’ve got five months. Use them well.

📢 Tax Audit for FY 2023-24: Key Updates and Compliance Guidelines 📢 As the tax audit season for FY 2023-24 approaches, businesses and professionals need to stay updated with the latest guidelines under Section 44AB of the Income Tax Act. This year brings key changes that every taxpayer and auditor should be aware of to ensure smooth compliance and avoid penalties. 🔍 What's New for FY 2023-24? 1️⃣ Increased Tax Audit Threshold: For businesses, the tax audit threshold under Section 44AB(a) has been increased to ₹10 crore (turnover), provided 95% of receipts and payments are digital. This shift encourages digital transactions, reducing cash dealings. 2️⃣ Presumptive Taxation Scheme (Section 44AD & 44ADA): Professionals under Section 44ADA with gross receipts up to ₹50 lakhs can declare 50% of their income as presumptive income. Meanwhile, businesses with turnover up to ₹2 crores can opt for Section 44AD with presumptive income of 8% for cash transactions and 6% for digital. 3️⃣ Reporting Requirements on Foreign Transactions: With an increased focus on foreign transactions, auditors must report all international transactions, including foreign assets and income, to ensure compliance with the black money law and FATCA regulations. 4️⃣ Additional Reporting on CSR Spending: The Companies Act mandates reporting on Corporate Social Responsibility (CSR) spending. Auditors now need to ensure that this is properly accounted for in their reports to avoid any discrepancies. 📝 Important Deadlines: Tax Audit Report Submission (Form 3CA/3CB and 3CD): The due date to file tax audit reports is 30th September 2024 for taxpayers who require a tax audit. ITR Filing Deadline: The ITR filing deadline for taxpayers covered under the tax audit is 31st October 2024. ✅ Key Areas to Focus On: GST Reconciliation: Ensure proper reconciliation between GST returns and books of accounts to avoid mismatches. Form 3CD Changes: Be mindful of new changes in Form 3CD, particularly in reporting clauses related to GST and disallowance of expenses. Loan Reporting: Disclose loans accepted or repaid in cash exceeding the prescribed limits. 📌 How to Prepare for a Tax Audit? Organize Your Documents: Make sure all financial statements, invoices, and transaction records are accurate and up-to-date. Digital Record Keeping: Utilize accounting software that integrates well with GST and tax reporting systems for seamless audits. Regular Compliance Checks: Schedule internal audits or reviews throughout the year to stay on top of compliance. Tax audits are a critical part of ensuring tax compliance for businesses. Being proactive and adhering to the updated guidelines for FY 2023-24 will save time, reduce stress, and ensure your organization avoids hefty penalties. 👨💼 As a Chartered Accountant, it's essential to stay informed and guide your clients through the latest compliance requirements effectively. #TaxAudit #FY2023_24 #TaxCompliance #IncomeTax #AuditSeason #CA

Decentralize Tax Responsibility - It’s Time We Move Beyond the Silos Tax isn’t just a “backend function.” It touches pricing, supply chains, contracts, employee benefits, digital product design - almost every strategic decision a business makes. So why should tax accountability sit with one team alone? Decentralizing tax responsibility doesn’t mean giving up control. It means enabling business teams - finance, legal, ops, HR, sales - to understand how their decisions trigger tax implications. It’s about creating: a. Shared ownership b. Better foresight c. Fewer last-minute fire drills d. More proactive risk management When tax becomes a collective responsibility: a. Compliance improves b. Opportunities (like incentives, treaty benefits, or structuring options) aren’t missed c. Trust between tax and business teams deepens #TaxLeadership #BusinessPartnering #Decentralization #CrossFunctionalCollaboration #TaxAwareness #CorporateGovernance #RiskManagement

I spent less than 1 hour filing taxes this year. Not because we didn’t make money. :) But because we planned. Planning saves me stress, valuable time, and energy that should go into finding leads and closing deals. Here is how you can get ahead of the game and prepare next March: ☑ 𝗛𝗶𝗿𝗲 𝗮 𝗕𝗼𝗼𝗸𝗸𝗲𝗲𝗽𝗲𝗿: No matter how small your business is, a bookkeeper organizes your financial records and categorizes items correctly. ☑ 𝗥𝗲𝘃𝗶𝗲𝘄 𝗠𝗼𝗻𝘁𝗵𝗹𝘆: By the 10th of each month, review your P&L and financial statements with your bookkeeper. This keeps you informed. ☑ 𝗦𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗧𝗮𝘅 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴: In the Fall, book an hour with a CPA for tax pre-planning. This helps you explore options and trade-offs. ☑ 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗣𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝗣𝗮𝘆𝗺𝗲𝗻𝘁𝘀: Know the large amounts of money you may need to pay (if profitable). This prepares you for any surprises. ☑ 𝗦𝘂𝗯𝗺𝗶𝘁 𝗗𝗼𝗰𝘂𝗺𝗲𝗻𝘁𝘀 𝗶𝗻 𝗙𝗲𝗯𝗿𝘂𝗮𝗿𝘆: Hire the CPA again in February to submit the paperwork. Send last year’s financial documents to them. Taxes are stressful enough. Don't add to that stress by procrastinating. PS. I'm forever grateful to all the financial professionals in my life!

The Budget 2024 has prompted significant changes to tax planning for corporate restructuring and M&A activities. In a landmark move, the government has abolished the Angel tax issue under section 56(2)(viib) of the Income Tax Act, 1961. This provides substantial relief to startups and companies raising equity finance, thereby encouraging more equity investments. The elimination of the buyback tax under section 115QA marks another significant change. Traditionally, advisors utilized these provisions to efficiently withdraw surplus funds from companies before an M&A transaction. With the new provisions, buyback proceeds will now be taxed as dividends for shareholders, making buybacks less attractive. However, allowing differential cost of acquisition on bought-back shares as a 'capital loss' in the future offers a silver lining. Advisors will need to structure M&A transactions to align capital loss on buybacks before the transaction with capital gains on the sale of shares during the transaction. Additionally, the reduction in the LTCG tax rate from 20% to 12.5% is a major boost for M&A transactions. For private limited companies, the benefit of indexation was minimal, leading promoters to pay nearly 23.92% tax on share sales. The new tax rate significantly reduces the tax liability for promoters and investors, thereby fostering corporate restructuring and M&A activities. #Budget2024 #TaxPlanning #CorporateRestructuring #MergersAndAcquisitions #AngelTax #EquityFinance #BuybackTax #LTCG #TaxReform #StartupRelief #InvestmentBoost #M&AStrategy #CorporateFinance

IRC code Section 351 refers to a provision in the U.S. Internal Revenue Code (IRC). Specifically, it relates to the tax treatment of transferring property to a corporation. Under Section 351: No Gain or Loss on Transfer: If a person (or group of persons) transfers property to a corporation in exchange for its stock, and immediately after the transfer, they are in control of the corporation (typically this means owning at least 80% of the corporation's total combined voting stock), then no gain or loss is recognized on the transfer. Exceptions: If, in addition to stock, the transferor also receives other consideration, like cash ("boot"), then gain (but not loss) may be recognized to the extent of the boot received. Basis Considerations: The basis of the stock received in the transfer is typically the same as the basis in the property transferred, adjusted for any boot received or liabilities assumed by the corporation. Liabilities: If you transfer property subject to a liability (like a mortgage) to the corporation, the liability generally doesn't trigger gain. However, if the amount of the liability exceeds the basis of the property transferred, then the excess is treated as boot, and a gain might be recognized. Purpose: This provision exists to allow businesses to restructure or transfer assets into a corporate entity without triggering an immediate tax consequence, as long as the primary motive isn't to avoid federal income tax. Other Considerations: If the property transferred to the corporation has built-in gain (i.e., its value is more than its tax basis), then the corporation will take a "carryover" basis in the property. This means that if the corporation later sells the property, it will recognize the same gain that the transferor would have recognized had they sold the property directly. It's worth noting that while Section 351 provides a means to defer gain on transfers of property to a corporation, there are other sections of the IRC and associated regulations that might apply in certain situations.