When should tax advisory for startups start in India?

Key takeaways

• Advisory is strategic, compliance is routine, filings are execution, you need all three working together.
• First 90 days decide your long term tax posture, set up GST, TDS, invoicing, and a clean chart of accounts early.
• Pick the right entity, use incentives like Section 80 IAC, optimize GST, and plan advance tax to protect cash.
• Keep a live compliance calendar for GST, TDS, income tax, and ROC, reconcile monthly, file on time, and store evidence.
• Use a CA led managed service with a dashboard to avoid penalties and keep investors, banks, and auditors comfortable.
• AI Accountant blends CA advisory with a real time dashboard for risk review, calendars, SOPs, and accurate filings.

Startup tax advisory explained

If you are building a company in India, tax advisory is a must have. Missed GST or TDS deadlines drain cash, wrong entity choices slow funding, and weak records derail diligence. With the right tax advisory, you get a clear plan, a clean calendar, and filing support that just works.

Advisory vs compliance vs filings

Advisory sets strategy, it covers entity selection, GST place of supply, TDS architecture, audit readiness, and benefits such as Section 80 IAC. Compliance sets up registrations, SOPs, and a workable calendar. Filings execute GST, TDS, income tax, and ROC with reconciliations.

A practical flow: Advisory, then compliance, then filings, with evidence and reconciliations at every step.

Section 80 IAC can grant a full profit deduction for any three years out of ten, for eligible DPIIT recognized startups with the right documentation. A CA led service can help you evaluate eligibility, file recognition, and time your three year window to match profitability.

Further reading: Startup compliance checklist, Tax compliance for startups in India, Tax planning strategies for Indian startups, Complete tax guide for startups

Taxation advisory for new businesses, first 90 days

Your first 90 days after incorporation set the tone. A clean setup saves months of stress and rework.

Registrations

• Apply for PAN and TAN immediately after incorporation.
• Register for GST when turnover crosses 20 lakh, 10 lakh in special category states, many startups register voluntarily to claim ITC from day one.
• Enroll for Professional Tax where applicable, common in Maharashtra and Karnataka.

Bank and invoicing

• Open current accounts, integrate payment gateways, and confirm settlement cycles.
• Set accurate HSN or SAC codes in your billing tool.
• Enable e invoice if you cross the 5 crore turnover threshold, effective per current notifications.
• Check Reverse Charge rules for your services and vendors.

Books and documentation

• Design a chart of accounts that maps to your revenue model, cost drivers, and funding needs.
• Draft simple expense policies for travel, tools, subscriptions, and vendor bills.
• Create vendor onboarding forms to collect PAN, GSTIN, address, and signed agreements.

TDS readiness

• Activate your deductor account on TRACES.
• Plan monthly challans and quarterly returns, use Form 24Q for salaries and 26Q for other payments, see TDS return filing services.
• Tag vendor categories so the right section applies from day one.

Further reading: Guide on angel tax, Startup readiness checklist, Startup tax compliance

Business tax planning for startups

Business tax planning protects cash flow, it is not about shortcuts, it is about timely, compliant choices.

Choose the right entity

• Proprietorship, very easy to start, full control, unlimited liability, tax at slab rates up to 30 percent.
• LLP, limited liability and pass through style taxation, suitable for services, sometimes less attractive to investors, tax at 30 percent plus surcharge where applicable.
• Private limited, investor friendly, can qualify for Section 80 IAC, compliance is higher, tax at 25 percent if turnover is below 400 crore.

Use incentives and allowances

• Section 80 IAC, DPIIT recognized eligible startups can claim 100 percent deduction of profits for any three of ten years.
• R and D benefits, DSIR pathways can support enhanced deductions on research costs.
• Accelerated depreciation, use permitted rates to manage taxable income.

Optimize GST

• Get place of supply right, especially for services and SaaS.
• Understand e commerce operator liability under Section 9, sub section 5.
• Exports are zero rated, many SaaS exports qualify, align contracts, LUTs, and invoices as proof.

Manage TDS cleanly

• Classify vendors correctly, for example Section 194C for contractors at about 1 to 2 percent, Section 194J for professionals at 10 percent, Section 194O for marketplaces at 1 percent.
• Deposit TDS by the 7th of the next month to avoid interest and fees.

Plan advance tax

• Pay 15 percent by June 15, 45 percent by September 15, 75 percent by December 15, 100 percent by March 15.
• If estimated tax is below 10,000 for the year, advance tax may not apply.
• File on time even with losses to carry them forward.

Think cross border early

• Use the US India DTAA to reduce withholding on royalty and service fees where relevant.
• Watch permanent establishment risks for foreign promoters who spend time in India or direct key functions from here.

Make payroll efficient

• Use simple allowances like HRA and LTA where eligible.
• ESOPs, perquisite tax at exercise on FMV minus exercise price, gains at sale are capital gains.

Further reading: Planning strategies, Cross border entity and IP planning, Startup tax guide

Startup tax filing support

Execution keeps you penalty free. Even with no revenue, a company files ITR 6 by October 31, audit cases may extend to November 30.

Compliance calendar snapshot

GST

• GSTR 1 due on the 11th for monthly filers, QRMP differs, late fee is 200 per day.
• GSTR 3B due on the 20th, 22nd, or 24th, interest can be 18 percent for delays.
• GSTR 9 annual return due on December 31, late fee is 200 per day.

TDS

• Monthly challan by the 7th of the next month, late payment interest can be 1.5 percent per month.
• Quarterly returns 24Q and 26Q due on July 31, October 31, January 31, and April 30, late fee under Section 234E is 200 per day.
• Issue Form 16 and 16A by May 31.

Income tax and ROC

• ITR 6 due October 31, audit cases November 30, late fees can reach 10,000 based on income.
• AOC 4 and MGT 7 due October 30, late fee is 100 per day.
• DIR 3 KYC due April 30, late and reactivation fees can apply.

Mini checklist for TDS setup

• Reconcile Form 26AS and AIS with GSTR 2B and your books.
• File NIL returns when there is no deduction to keep history clean.
• Validate PAN for all deductees at onboarding.

Know when a tax audit applies, turnover above 1 crore generally triggers audit, the threshold can move to 10 crore if at least 95 percent of receipts and payments are digital.

A managed service like AI Accountant handles GSTR 1, 3B, and 9, TDS 24Q, 26Q, 27Q, income tax returns, and small company ROC filings such as MGT 7 and AOC 4, see ROC and secretarial support.

Further reading: ITR filing for startups, Compliance calendar essentials

Tax services for entrepreneurs

Founders need company and personal planning to work together, so there are no surprises at year end.

Salary and dividends

• Dividends are taxed at your slab rate since DDT removal, TDS at 10 percent on dividends above 5,000.
• A fixed salary adds predictability and supports EPF where applicable, many founders use a balanced mix.

ESOPs and buybacks

• ESOP perquisite tax at exercise on FMV minus exercise price.
• Sale is capital gains based on holding period, keep Rule 11UA valuation reports on file.

Angel investments and Section 56

• DPIIT recognized startups that meet valuation rules are exempt from the so called angel tax under Section 56, sub section 2, clause viib.
• Keep recognition and valuation reports ready before the round.

NRI promoter points

• If resident in India, typically more than 182 days, report global income.
• Use DTAA to avoid double tax and disclose foreign assets in Schedule FA.

Further reading: Angel tax overview, Founder tax guide, Founder ITR guide, Cross border founder tax

Common mistakes in startup tax advisory and how to fix them

GST mistakes

• Wrong HSN or SAC codes, or missing e invoice after crossing the threshold, lead to notices and credit issues.
• Fix with a pre invoice checklist and monthly GSTR 2B reconciliation, see GST reconciliation for SMEs.

TDS oversights

• Skipping TDS on contractors, consultants, influencers, or marketplace payouts is common.
• Classify vendors at onboarding, review quarterly, and lock rates in your accounting tool.

Documentation gaps

• Missing SOWs, missing invoices, and weak proofs derail audits and diligence.
• Maintain an audit ready pack with agreements, invoices, bank proofs, and reconciliations.

Advance tax issues

• Ignoring advance tax creates interest under Sections 234B and 234C.
• Use the safe harbor of paying at least prior year tax where applicable, or quarterly projections.

Reconciliation failures

• Bank, PG, and ledger mismatches create revenue leaks and GST gaps.
• Reconcile monthly and address variances with your CA before filings.

Further reading: Frequent mistakes and fixes, Setup checklist

AI Accountant virtual accounting for tax advisory for startups

AI Accountant blends CA led advisory with a live dashboard. You get big firm expertise with system driven visibility.

What the CA team covers

• Entity selection and structuring with tax impact.
• GST setup and place of supply decisions.
• TDS architecture and vendor classification.
• International tax review for cross border billing.
• Advance tax planning and projections.
• Filing support for GSTR 1, GSTR 3B, GSTR 9, TDS 24Q, 26Q, 27Q, company ITR, and ROC for small companies.

What the dashboard shows

• Compliance status with a real time calendar and alerts.
• Bank reconciliation trend with match rates and breaks.
• GST health checks and e invoice enablement status.
• Payroll TDS status and due amounts.
• A central document repository and a single thread for chats with your CA team.

The result is simple, you always know what is due, what is filed, and what is next. Explore AI Accountant.

Startup tax advisory onboarding and engagement

Onboarding timeline

• Week one, discovery and clean up, we review past filings, bank feeds, and books.
• Week two, calendar and SOP setup, we map invoicing, TDS flows, and responsibilities.
• Week three, go live, filings move to a steady rhythm with dashboard alerts.

Founder prep checklist

• Incorporation documents and prior filings.
• Bank statements for the last six months.
• Invoices, cap table, and payroll data.
• Access to your software where needed.
• Use the dashboard for all documents and queries, you get 24 by 7 access and status.

Suggested tools for bookkeeping and finance

• AI Accountant, CA led managed accounting with a live dashboard.
• QuickBooks, online accounting for invoicing and bank feeds.
• Xero, cloud accounting with strong multi currency.
• Zoho Books, GST friendly accounting with e invoice support.
• Tally Prime, on premise accounting used widely in India.
• FreshBooks, simple invoicing and expense tracking for services.

FAQ

What is the exact difference between advisory, compliance, and filings for a seed stage startup

Advisory is strategy, entity choice, GST place of supply, TDS architecture, incentive planning, and audit readiness. Compliance is your operating system, registrations, SOPs, and a calendar. Filings are the execution, GST 1 and 3B, TDS 24Q and 26Q, ITR 6, and ROC. AI Accountant bundles all three so planning ties directly to filings and reconciliations.

How soon should we register for GST, and how do we handle SaaS exports with zero rating

Register at 20 lakh turnover, 10 lakh in special category states, or voluntarily to claim ITC early. For SaaS exports, zero rating applies if you meet conditions, recipient outside India, payment in convertible foreign exchange or INR as permitted, supply of services, and LUT or bond when you export without paying IGST. Contracts and invoices must support place of supply. A CA managed setup like AI Accountant configures your invoicing and proofs.

We are loss making this year, do we still need advance tax and audit

If your total tax is below 10,000, advance tax is not required. You still file ITR 6 on time to carry forward losses. Audit depends on turnover, usually above 1 crore, or up to 10 crore if 95 percent plus of transactions are digital, then audit may not apply. Confirm with your CA based on your mix of receipts and payments.

What is the SLA for monthly close, GST and TDS filings in a CA managed service

Typical SLAs, books closed by the 7th to 10th working day, GSTR 1 filed before the 11th for monthly filers, 3B before the 20th, TDS challans by the 7th and quarterly returns before due dates. AI Accountant tracks these on a dashboard with status, evidence, and variance flags so you see risks early.

How do you reconcile books with GSTR 2B, 26AS, and bank, we want audit ready packs each quarter

Adopt a fixed cadence, daily bank sync, weekly vendor bill capture, monthly GSTR 2B reconciliation, quarterly Form 26AS and AIS checks. Differences are tagged and resolved before filings. AI Accountant provides a quarterly audit pack, TB, ledgers, bank proofs, reconciliations, and management notes.

How should we set TDS sections for vendors, especially marketplaces, freelancers, and foreign services

Classify at onboarding, Section 194C for contractors, 1 to 2 percent, Section 194J for professionals, 10 percent, Section 194O for marketplace operators, 1 percent. For imports of services you consider GST RCM, not TDS under domestic sections. AI Accountant hard codes vendor categories and rates, then validates PAN and tracks exceptions.

How does e invoicing change our workflow once we cross 5 crore turnover

You must generate IRN and QR codes through the Invoice Registration Portal. Your billing system should post to IRP, retrieve IRN, and print the QR on the invoice. Delays in IRN generation can block logistics and GSTR matching. AI Accountant reviews your tool stack and sets a pre invoice checklist to avoid rejections.

Can a DPIIT recognized startup actually claim Section 80 IAC, what paperwork is needed

Yes if you meet eligibility, recognition by DPIIT, incorporation window, innovative product or service, and age thresholds. You need recognition letters, incorporation documents, board resolution, and return disclosures. Timing matters, many choose the three profitable years within the ten year window. A CA team can simulate scenarios before you elect the years.

We are a Delaware parent with an Indian subsidiary, what are the common cross border tax pitfalls

Watch permanent establishment exposure from decision making in India, inter company pricing for services and IP, and withholding on royalties or fees, use the US India DTAA where applicable. Maintain inter company agreements, invoices, and benchmarking. AI Accountant coordinates with your global advisors and sets a compliant billing model.

What founder compensation mix is tax efficient, salary versus dividends, and how do ESOPs affect this

Salary is predictable and supports EPF and deductions, dividends are taxed at slab rates post DDT removal and attract TDS at 10 percent above 5,000. ESOPs trigger perquisite tax at exercise, then capital gains on sale. Use vesting schedules, exercise windows, and secondary liquidity planning to smooth cash impact. Model all three with your CA before board approval.

How does an AI enabled Virtual Accounting service integrate with our stack, Tally, Zoho Books, QuickBooks, or Xero

Integration options include direct connectors or bank feeds, API based invoice sync, and file based imports. The AI Accountant team supports Tally, Zoho Books, QuickBooks, and Xero, and standardizes charts of accounts, tax codes, and item masters. The dashboard then pulls compliance status and reconciliations regardless of the underlying ledger.

What happens if we miss a TDS deposit or file a return late, what is the remediation workflow

Compute interest, often 1.5 percent per month for late payment, pay the challan, and file the pending return with late fee under Section 234E at 200 per day. If there is a short deduction, gross up or recover as needed and correct in the next return. AI Accountant escalates misses with a root cause note and updates SOPs to prevent repeats.

Conclusion, tax advisory for startups that keeps you calm and compliant

Build a simple, strong system, pick the right entity, set up clean GST and TDS processes, keep a live calendar, reconcile monthly, file on time, plan ahead. You do not have to do this alone, AI Accountant combines a CA led team with a dashboard that shows your numbers, your filings, and your documents in one place. Book a short consult and see how the managed service can fit your stage and your goals, visit AI Accountant.

References, Startup compliance checklist, AI Accountant