Does the small business really pay less than the big company in India?

For most realistic incomes, yes. Up to 12 lakh of profit the sole trader pays no income tax at all, and at 24 lakh the rate is about 13.0%, roughly half the 25.17% a large company pays under the concessional regime. The position only flips at high unincorporated profit, around 1 crore, where the sole trader's 29.5% edges above the company. We report this plainly because it is the honest result, even though it runs opposite to the other four countries.

Why is there no social-security charge in the Indian figure?

Because India does not levy a mandatory social-security contribution on a self-employed person's own business profit. The provident-fund and state-insurance schemes are employer-employee arrangements, not a tax on a sole trader's profit. So unlike the UK, US, Canada and Australia, the Indian all-in rate is income tax, surcharge and cess only, and the income-tax-only rate is the same number.

Why compare against a domestic company rather than a multinational?

Because for India there is no public, company-specific, jurisdiction-matched multinational effective rate we can state to the decimal. The honest, sourceable benchmark is the published concessional corporate rate of 25.17%, which is a real rate on real company profit in the same country.

§India only

The India comparison: a self-employed professional versus a large domestic company

ByLoopholeKiln EditorialPublished17 June 2026

Figures current as of1 January 2026·Corrections

← What you pay versus what they pay

India is the exception on this site, and we are not going to pretend otherwise. For most ordinary small businesses the Indian system is lighter than the rate a large company pays, not heavier. A self-employed professional turning 12 lakh of profit in 2025/26 pays no income tax at all, because of the Section 87A rebate. On 24 lakh the all-in rate is 13.0%, roughly half what a large domestic company pays under the concessional regime. The gap this site documents only appears at high unincorporated profit: at 1 crore the sole trader finally edges above the company, 29.5% against 25.17%. Here is the arithmetic, line by line, and the two caveats that keep it honest.

The small business: the working

Sole proprietor, India, 2025/26 (Assessment Year 2026/27), under the new personal regime. Net profit after expenses, no investment-linked deductions, no chapter VIA reliefs modelled. This is the baseline an unplanned sole trader actually faces. We show three profit levels rather than one, because the rate climbs steeply with income and a single figure would hide that. The new-regime slabs are nil up to 4 lakh, 5% on 4 to 8 lakh, 10% on 8 to 12 lakh, 15% on 12 to 16 lakh, 20% on 16 to 20 lakh, 25% on 20 to 24 lakh, and 30% above 24 lakh.

At 12 lakh of profit:

Step	Calculation	Result
Slab nil, up to 4 lakh	4,00,000 × 0%	nil
Slab 5%, 4 to 8 lakh	4,00,000 × 5%	20,000
Slab 10%, 8 to 12 lakh	4,00,000 × 10%	40,000
Income tax before rebate		60,000
Section 87A rebate	up to 12 lakh, full	(60,000)
Net income tax	60,000 - 60,000	nil
All-in effective rate	nil ÷ 12,00,000	0.0%

At 24 lakh of profit:

Step	Calculation	Result
Slab 5%, 4 to 8 lakh	4,00,000 × 5%	20,000
Slab 10%, 8 to 12 lakh	4,00,000 × 10%	40,000
Slab 15%, 12 to 16 lakh	4,00,000 × 15%	60,000
Slab 20%, 16 to 20 lakh	4,00,000 × 20%	80,000
Slab 25%, 20 to 24 lakh	4,00,000 × 25%	1,00,000
Income tax		3,00,000
Section 87A rebate	none above 12 lakh	nil
Surcharge	none below 50 lakh	nil
Health and education cess	3,00,000 × 4%	12,000
Total tax	3,00,000 + 12,000	3,12,000
All-in effective rate	3,12,000 ÷ 24,00,000	13.0%

At 1 crore of profit:

Step	Calculation	Result
Income tax, slabs up to 24 lakh	as computed above	3,00,000
Slab 30%, above 24 lakh	(1,00,00,000 - 24,00,000) × 30%	22,80,000
Income tax	3,00,000 + 22,80,000	25,80,000
Surcharge, 10% above 50 lakh	25,80,000 × 10%	2,58,000
Subtotal	25,80,000 + 2,58,000	28,38,000
Health and education cess	28,38,000 × 4%	1,13,520
Total tax	28,38,000 + 1,13,520	29,51,520
All-in effective rate	29,51,520 ÷ 1,00,00,000	29.5%

The large company: a domestic company under the concessional regime

A large domestic company that elects Section 115BAA pays a flat effective rate of 25.17%, a 22% base rate carrying a 10% surcharge and a 4% health and education cess. That is a real, published, legally available rate on company profit. A separate regime for new manufacturing companies, Section 115BAB, gives about 17.16%, but it closed to new entrants when its commencement window expired on 31 March 2024, so it is no longer something a new business can choose.

The comparison

India sole trader, by profit	All-in rate	Large company (115BAA)
12 lakh	0.0%	25.17%
24 lakh	13.0%	25.17%
1 crore	29.5%	25.17%

At 12 lakh the sole trader pays 0.0% against the company's 25.17%, the gap fully reversed. At 24 lakh the sole trader pays 13.0%, about half the company rate, the gap still reversed. Only at 1 crore does it turn: the sole trader's 29.5% is about 1.2 times the company's 25.17%. The crossover sits somewhere between 24 lakh and 1 crore of profit.

Caveat A, the measure. India has no mandatory social-security contribution on a self-employed person's own business profit. There is no National Insurance, no self-employment tax, no CPP, no Medicare Levy to add. So the Indian all-in rate is income tax, surcharge and the 4% cess, and nothing else, which means the all-in rate and the income-tax-only rate are the same number. There is no payroll wedge to strip out, and no way to claim we padded the small-business figure. The company's 25.17% is corporate income tax only, and a further layer of personal tax falls on the owner when company profits are drawn out as dividends.

Caveat B, the scope. This comparison is matched on country, both sides are Indian rates, which makes it cleaner than our UK, US and Australia pages, where a domestic small firm is set against a global multinational rate. The benchmark here is the published Indian concessional corporate rate, not a worldwide figure and not a claim about any particular company. We do not use a multinational rate for India, because no defensible, jurisdiction-matched, company-specific India figure is publicly available to the decimal.

Why India runs the other way

The reason is not clever planning by the small business. It is that the personal regime is genuinely generous at low and middle incomes, while the company rate is fixed. The Section 87A rebate clears all tax up to 12 lakh, and the slabs stay light up to 24 lakh. A large company gets none of that relief; it pays 25.17% from the first rupee of taxable profit. So in India, for most ordinary small businesses, it is the small trader who pays the lower rate, and the familiar story only returns at the top of the income scale.

Key facts

Indian sole proprietor, 2025/26 new regime: 0.0% at 12 lakh profit, 13.0% at 24 lakh, 29.5% at 1 crore.
The Section 87A rebate (raised to 60,000) makes income up to 12 lakh tax free.
There is no mandatory self-employed social-security wedge, so the all-in and income-tax-only rates are identical.
Large domestic company benchmark: 25.17% under Section 115BAA (22% base, 10% surcharge, 4% cess).
The gap reverses for most small businesses and only holds, mildly, at about 1 crore (1.2 times).

Sources