Strategic Tax Planning for Startups and MSMEs in India Direct Tax
Madumitha S
Mohammed sameel
Abhinithi V
Maddi Thrushar
Mayur Simha G
Merin Annancia
Mentor: Dr Batani Raghavendra Rao (M.Com, PhD)
Title:
Strategic Tax planning for Startups and MSMEs in India: A detailed framework for Fiscal Optimization and compliance in the 2026 economic scenario.
Abstract
Taxation plays a crucial role in shaping the growth, sustainability, and competitiveness of startups and Micro, Small and Medium Enterprises (MSMEs) in India. While tax revenues are essential for national development, complex tax structures and compliance requirements often impose financial and administrative burdens on emerging enterprises. In this context, strategic tax planning has evolved from a year-end compliance activity to an integral component of financial management and long-term business sustainability.
This study examines the direct tax provisions, exemptions, and compliance frameworks applicable to startups and MSMEs in India, with specific reference to incentives such as the startup tax holiday under Section 80-IAC, presumptive taxation under Section 44AD, and Goods and Services Tax (GST) input tax credit mechanisms. Using a descriptive and analytical research design, the study integrates primary survey data with secondary sources including statutory provisions, policy reports, and scholarly literature. Scenario-based analysis is employed to assess the impact of tax planning strategies on tax liability, cash flow, and reinvestment capacity.
The findings reveal that enterprises adopting proactive and structured tax planning practices experience reduced tax burdens, improved liquidity, and enhanced compliance efficiency. However, limited awareness of available incentives and the complexity of tax regulations continue to constrain optimal utilisation. The study concludes that effective tax planning, supported by digital compliance systems and professional advisory services, can significantly contribute to ease of doing business, enterprise scalability, and economic growth in India.
Keywords:
• Startup India
• Section 80-IAC
• Presumptive Tax system
• GST input credits
• Tax holiday.
