Tax Planning & Restructuring

Tax planning in 2026 is not about chasing the last 80C deduction. It is about deciding which regime your salary sits in, when to crystallise capital gains, how to time an ESOP exercise, whether your founder shareholding should sit in a family investment company, and how to restructure a business so a ₹25-crore sale does not trigger ₹3.5 crore in tax. The rules have shifted hard since 2024 — buyback is now taxed in the shareholder's hands, the new regime is default, GAAR is enforced for tax benefits above ₹3 crore, and Section 56(2) reaches wider than most realise.

A good tax plan is a 5-year cash-flow model, not a March-31 scramble. This page walks through what we build, how restructuring actually happens, and where things go wrong when planning is done from a 2014 textbook.

At a Glance

• Who needs this: Founders, HNIs, family offices, growing businesses planning a sale, succession, merger, demerger or conversion.
• Governing law: Income-tax Act 1961 (Sections 47, 50B, 56(2), 79, 115BAA, 115BAC), Companies Act 2013, GAAR under Chapter X-A, Stamp Acts, FEMA where cross-border.
• Plan turnaround: 7-14 working days from document handover.
• Implementation: 30-180 days depending on structure; NCLT-approved schemes typically run 6-9 months.
• Output: 5-year tax model, structure memo, GAAR screen, board resolutions, valuation reports, ITR-ready documentation pack.
• Coverage: Personal tax, corporate tax, capital gains, ESOPs, succession, mergers, demergers, slump sale, cross-border.
• Annual review: One review per engagement year against the latest Finance Act and updated AIS data.

What's New for FY 2026-27

Five shifts since 2024 change how planning is done. Old playbooks need a rewrite.

• New regime default with ₹12 lakh rebate: Budget 2025 widened the rebate so income up to ₹12 lakh attracts no tax under the new regime, but the old regime still wins for high-HRA salaried taxpayers and home-loan borrowers.
• Buy-back fully taxed with the shareholder: From 1 October 2024, buy-back proceeds are taxed as deemed dividend in the shareholder's hands; the earlier buyback-tax-at-company-level route is gone, and salary-vs-dividend math has shifted.
• Capital gains rationalisation: Holding periods are now 12 or 24 months across asset classes; LTCG on listed equity is 12.5% over a ₹1.25 lakh exemption; LTCG on unlisted shares and property is 12.5% without indexation.
• AIS / TIS live cross-check: The department now matches your ITR against the Annual Information Statement in real time — restructuring transactions show up there, so paperwork has to match the disclosure.
• Form 10F mandatory e-filing: Cross-border payments need a TRC and Form 10F filed electronically before remittance; missing the filing means treaty benefit is denied and full 20%+ withholding applies.

Why Tax Planning in 2026 Is Different

The structural ground has moved. Six reasons a 2026 plan is not a refresh of a 2020 plan.

• The default has flipped: Most salaried taxpayers are now on the new regime by silence; switching back to the old regime needs a deliberate Form 10-IEA filing every year for business income earners.
• GAAR is no longer theoretical: Arrangements with tax benefit above ₹3 crore face automatic GAAR scrutiny, and the AO can disregard the form to tax the substance.
• Capital gains windows are narrower: With listed equity at 12.5% and unlisted at 12.5% without indexation, timing matters — a six-month wait can change the tax by lakhs.
• ESOP timing is a planning event: Exercise tax (perquisite) and sale tax (capital gains) are two separate hits; sequencing them across financial years saves real money.
• Cross-border treaty benefit is conditional: Post-MLI, the principal-purpose test and LOB clauses can deny treaty relief if a structure lacks substance.
• Succession cannot be back-fitted: Once an asset sits in your individual name, moving it to a trust or HUF is a transfer event — pre-emptive structuring is the only cost-free path.

How It Actually Works

Six stages, from diagnostic to defence. Each has a defined output and a defined timeline.

Step 1: Diagnostic and Income-Tax X-Ray (3-5 Days)

We start with the boring part: every income source, every asset, every related-party transaction, every prior year's ITR, AIS, 26AS and TIS. The output is a one-page snapshot of your effective tax rate, the obvious leakages, and the structural risks that will not survive an assessment.

This is where surprises surface — an HUF that was never properly partitioned, a foreign asset that was not reported in Schedule FA, an ESOP grant where perquisite tax was paid but the cost basis was never updated.

Step 2: 5-Year Plan and Cash-Flow Model (5-10 Days)

A real tax plan models cash, not just tax. We build a 5-year projection covering salary, business income, capital gains windows, ESOP exercise calendar, expected dividend and planned restructuring. Both regimes are computed for each year.

Where the math is close, we test what changes the answer — buying a house, taking a home loan, switching to NPS, or shifting bonus timing. The plan tells you exactly what to do in March 2026, what to defer to FY 2027-28, and what to set up now so it qualifies later.

Step 3: Structure Selection and GAAR Screen (3-5 Days)

If restructuring is on the table — slump sale, demerger, holding company, family investment company, private trust — we test each candidate against three filters: tax outcome, regulatory feasibility, and GAAR survival.

A commercial-rationale memo is drafted at the time of the transaction, not retro-fitted later. This is the document an Assessing Officer reads first when a scrutiny notice arrives three years on.

Step 4: Implementation (30-180 Days)

Conversion of proprietorship to private limited under Section 47(xiv), slump sale under Section 2(42C), demerger under Section 2(19AA), amalgamation under Section 2(1B), family trust settlement, holding-company creation — each has its own paperwork.

Board resolutions, valuation reports under Rule 11UA and Rule 11UAA, NOC from lenders, NCLT petitions where required, stamp-duty optimisation, and statutory filings with the MCA and Registrar — we project-manage the full execution.

Step 5: Documentation Pack and ITR Alignment

Every working paper, CA opinion, valuation report, board resolution and contemporaneous email is archived in a single file. The ITR for the year of restructuring is prepared with full disclosure — Schedule CG, Schedule AL, Schedule FA and Schedule FSI as relevant.

Advance tax instalments are aligned to the plan so the year does not end with a Section 234C interest hit.

Step 6: Annual Review and Notice Defence

Each year we re-run the plan against the latest Finance Act and the updated AIS data. If a scrutiny or reassessment notice arrives, the response is drafted from the existing file — usually a 7-10 day turnaround instead of the 30-day scramble that happens when no contemporaneous documentation exists.

A Real Example: Founder Selling a 35% Stake

A founder of a Bengaluru SaaS company plans to sell a 35% stake to a PE fund for ₹25 crore. Shares were acquired in 2019 at a cost of ₹50 lakh. Without planning, the tax math looks like this:

• Sale consideration: ₹25,00,00,000
• Cost of acquisition: ₹50,00,000
• LTCG (unlisted shares): ₹24,50,00,000
• LTCG tax at 12.5%: ₹3,06,25,000
• With surcharge and cess: Roughly ₹3.45 crore total outflow

With planning, we ran four scenarios: direct sale, sale via a family investment company set up two years earlier, partial gift to spouse pre-sale, and reinvestment under Section 54F. The chosen path: 60% direct sale for liquidity, 40% rolled into a residential property under Section 54F, and a small slice settled into a private trust for the children's education. Final tax: ₹2.06 crore. Saving: roughly ₹1.39 crore. All documentation was in place six months before the sale closed, the GAAR memo was signed, and the ITR for AY 2027-28 disclosed the transaction in full. The AO raised no query.

What Backs Up Each Structure

A defensible structure is not a clever bullet point — it is a stack of contemporaneous evidence. For every restructuring or planning decision, we build:

• Commercial-rationale memo: Signed by the board, drafted before the transaction closes.
• Valuation report: By a registered valuer under Rule 11UA or Rule 11UAA, dated within six months of the transaction.
• CA opinion on tax position: Referencing the relevant sections, recent judgments and the GAAR screen.
• Board resolutions and shareholder approvals: Filed with the MCA on time, with minutes archived.
• Banking and accounting trail: Money flow and book entries that mirror the legal structure end-to-end.
• ITR schedule disclosure: Schedule CG, AL, FA and FSI as applicable, matching the AIS entry.
• Related-party audit trail: Documentation under Section 92 and Section 40A(2) where group entities are involved.

The structure is only as strong as the file behind it. An Assessing Officer will not accept a story without documents.

Where It Goes Wrong

The same eight mistakes show up across founder, family and corporate files. Each is avoidable with a screen done before the transaction.

• Buyback decisions on 2023 advice: After 1 October 2024 buy-back is shareholder-taxed; plans recommending buyback over dividend are now actively expensive.
• HUF formed without substance: A coparcener-formed HUF with no ancestral property and no genuine gifts gets clubbed under Section 64(2) and becomes a liability.
• Section 56(2)(x) ignored on slump sale: Transfer of business assets below fair value triggers deemed gift in the receiver's hands — a common slump-sale trap.
• Section 79 carry-forward lost: Change in shareholding above 49% in a closely-held company wipes out brought-forward losses unless statutory conditions are met.
• ESOP exercised in the wrong year: Exercising in a high-income year vs a low-income year can swing the perquisite tax by 10-15 percentage points.
• Section 47(xiv) conditions breached: Founder shareholding drops below 50% in year 3 or 4 of conversion — reverse charge of capital gains plus interest hits hard.
• Foreign asset missing in Schedule FA: Penalty under the Black Money Act is ₹10 lakh per asset per year; restructuring that touches offshore holdings must be reported.
• Stamp duty optimisation skipped: A slump sale structured well for income tax can still bleed 5-7% in stamp duty if state-level nuances are missed.

What You Receive at the End

• 5-year tax plan in spreadsheet form with annual update protocol
• Regime-choice analysis (old vs new) with switching guidance and Form 10-IEA template
• Structure recommendation memo with GAAR screen and commercial-rationale write-up
• Valuation report from a registered valuer under Rule 11UA / 11UAA where required
• CA opinion on the tax position, signed, dated and referenced
• All board resolutions, agreements, NCLT petitions and statutory filings
• Documentation pack archived for 10-year assessment defence
• ITR with full schedule disclosures matching the AIS entry
• One annual review against the latest Finance Act included in the engagement

How to Get Started

Share your last three years of ITR, AIS, financial statements and a one-line description of what you are trying to do — a sale, a succession, a regime switch, a restructuring, or a general tune-up. Within five working days we come back with a diagnostic call and a fixed scope.

Plans are priced on complexity, not on hours. A salaried HNI's annual plan is different from a founder's pre-exit restructuring, which is different from a multi-entity family office. The diagnostic call tells you exactly what your engagement looks like and what it costs, before any chargeable work begins.