In 2026, latest changes in business structuring are being driven by the full operationalization of the Income Tax Act 2025. For Chartered Accountants, the advisory landscape has shifted from simple entity selection to complex “Capital Efficiency Modeling.” With the government pushing for formalization, businesses in Kolkata and Howrah are rapidly moving away from sole proprietorships to more bankable structures like LLPs and Private Limited companies.
A well-structured business is not just about tax; it is about “Fundability.” If a client’s asset structure is messy, they will struggle to secure a business loan or a high-value loan against property. This Day 1 guide focuses on the critical legal pivots every CA must master this year.
1. Corporate Tax: The Section 115BAA Pivot
Legal Provision: Section 115BAA allows domestic companies to pay tax at a concessional rate of 22% (plus surcharge and cess), provided they forgo specific exemptions and incentives.
Applicability: Domestic companies that do not claim deductions under Section 10AA, 32(1)(iia), or other specific investment-linked incentives.
Example: A manufacturer buying machinery in Duttapukur might find that opting for the 22% flat rate is more beneficial than claiming additional depreciation, especially if they plan to maintain high working capital reserves for expansion.
Common Error: Opting for Section 115BAA without calculating the “MAT Credit” loss. Once opted, the company cannot use its existing Minimum Alternate Tax (MAT) credit.
Practical CA Tip: Perform a “5-Year Cash Flow Projection.” If the client has significant MAT credit or is planning a large warehouse expansion, the traditional 25% or 30% rate might still be better in the short term.
Client Impact: Lower tax rates improve the company’s net margins, which directly increases their Maximum loan amount for LAP by improving the Debt Service Coverage Ratio (DSCR).
2. Entity Conversion: Section 47 Exemptions
Legal Provision: Section 47 provides specific exemptions from Capital Gains tax when a proprietorship or partnership converts into a Private Limited company or LLP.
Applicability: Mandatory for firms looking to scale and raise institutional secured business loans.
Example: A local trader converting to a Pvt Ltd entity to secure a business loan upto 1 crore must ensure all assets and liabilities are transferred at book value to claim the Section 47 exemption.
Common Error: Violating the “5-Year Shareholding Rule.” If the original owners’ stake falls below 50% within five years of conversion, the exempted capital gains become taxable in the year of violation.
Practical CA Tip: Ensure the KMC mutation process is initiated immediately after conversion. Banks will not recognize the new entity as the owner of the collateral until the property records reflect the company’s name.
Client Impact: Formalization allows for better structuring of business assets, leading to lower interest rates from top 5 banks and NBFCs.
3. Slump Sale: The Section 50B Shift
Legal Provision: Section 50B deals with the “Slump Sale” of an undertaking. In 2026, the computation of “Fair Market Value” (FMV) has been tightened to prevent undervaluation.
Applicability: Business restructuring where an entire division is sold as a “Going Concern” for a lump sum.
Example: A logistics firm in North 24 Parganas selling its transport division to focus solely on warehouse expansion.
Common Error: Failing to get a valuation report from a Registered Valuer. The Income Tax Department now uses AI to cross-verify FMV with recent commercial property transactions in the area.
Practical CA Tip: Before the sale, check the GST risk area. While slump sales are generally exempt from GST, any “itemized sale” disguised as a slump sale can lead to heavy GST demand notices.
Client Impact: Proper slump sale planning prevents immediate tax outflow, allowing the seller to utilise the loan against property equity for new ventures.
4. Operational Automation: Boosting Advisory Value
Legal Provision: The 2026 framework emphasizes “Digital Proof.” From GSTR-3B interest auto-calculations to Section 234E late fees, compliance is automated.
Applicability: All CA firms providing high-end business process advisory.
Practical CA Tip: Stop providing just “Filing Services.” Start offering “Efficiency Audits.” By automating daily operations, you help clients increase profit margins, which makes your professional fee a “Value-Add” rather than an “Expense.”
Frequently Asked Questions (FAQs)
1. What are the latest changes in business structuring regarding LLPs in 2026?
The 2026 rules have made it easier to convert LLPs to Private Limited companies to help firms access equity funding. However, the tax on “Deemed Dividends” remains a critical check for CAs.
2. Is mutation mandatory for a newly converted Private Limited company?
Yes. If the company wants to refinance high-interest short-term debt using its property, an updated KMC mutation certificate in the company’s name is essential.
3. How does Section 115BAA affect my business loan eligibility?
By lowering your tax outgo, Section 115BAA increases your “Net Disposable Income,” which allows banks to offer a higher loan against property amount.
4. Can a Thika property be part of a business restructuring?
Yes, but you must ensure the Thika Controller’s NOC is updated to reflect the new entity’s name.
5. What is the impact of GST Advisory No. 649 on restructuring?
During a merger or demerger, the transfer of “Input Tax Credit” must be done via Form ITC-02. The new interest calculation rules ensure that the transferor’s cash ledger balance can be effectively utilized.
6. Does a slump sale attract GST?
No, the transfer of a business as a “Going Concern” is exempt from GST. However, if individual assets (like machinery) are sold separately, GST applies.
7. How can I improve my client’s CIBIL score after conversion?
Ensure all old loans of the proprietorship are closed and reported to the credit bureau. A clean first-time CIBIL score for the new company is vital for growth.
8. What is the benefit of a “Holding Company” structure in 2026?
It allows for better “Risk Isolation.” If one subsidiary faces a GST demand notice, the assets of the Holding company remain protected.
9. Can I get a loan against property for international expansion?
Yes. Many businesses in North 24 Parganas use property equity for international expansion after restructuring as a Private Limited entity.
10. How do I start the restructuring process?
Start with a property and financial audit. Check the current market value of your assets and your total high-interest debt.
Final Summary: Building for Scale
The latest changes in business structuring in 2026 are all about transparency and scalability. By moving clients to structured entities and optimizing their tax regime, CAs play a pivotal role in their growth story. Don’t just manage the “now”; structure the business for the “next.”
Is your client’s business structure hindering their funding potential? We can help you analyze their mortgage loan eligibility and property value to secure the best growth capital in India.
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