Tax drag · effective rate
How much tax does your structure really cost?
LLP and Pvt Ltd have opposite tax advantages. The winner depends on one thing: are you extracting profits as personal income, or leaving them in the business?
LLP effective rate
31.2%
keep ₹34.4L
Pvt Ltd effective rate
46.9%
keep ₹26.5L
LLP saves
₹7.9L
per ₹50L profit
Tax drag insight
LLP's effective extraction tax (~31.2%) is lower than Pvt Ltd's cascade (corp tax + dividend) of ~46.9%. You keep ₹7.9L more every ₹50L you earn.
Compounding the ₹7.9L/yr advantage at 10% growth for 5 years:
5-yr corpus edge
₹52.9L
↳ Extraction mode: LLP profit share is exempt in partners' hands under s.9(1)(i) (formerly 10(2A)). Pvt Ltd dividend is taxable at your slab. LLP's lower effective rate widens as your income crosses ₹1Cr (surcharge bites harder on Pvt Ltd cascade).
Tax rates: LLP at 30% + surcharge (12% above ₹1Cr) + 4% cess. Pvt Ltd new regime (formerly s.115BAA) at 22% + surcharge (10% above ₹1Cr) + 4% cess. Dividend taxed at individual slab + 4% cess. Does not include MAT/AMT. Verify your specific situation with a tax professional.
Common questions
LLP vs Pvt Ltd tax, statute-cited.
What tax rates does this tool use for LLP vs Pvt Ltd?+
The tool models an LLP at 30% plus surcharge (12% above ₹1 crore of income) plus 4% health and education cess, and a Pvt Ltd under the concessional 22% regime of s.115BAA of the Income-tax Act 1961 plus surcharge (10% above ₹1 crore) plus cess. Extract versus reinvest changes the answer — the same profit can carry very different effective rates depending on how it leaves the entity.
Why is LLP profit share tax-free in the partners' hands?+
A partner's share of LLP profit is exempt in their hands under s.9(1)(i) of the Income-tax Act 2025 (formerly s.10(2A) of the Income-tax Act 1961), because the LLP is taxed on its own profits at entity level. That is why the tool shows zero personal tax on the LLP side when profits are extracted.
How is a Pvt Ltd dividend taxed?+
Since FY 2020-21 the dividend distribution tax is gone — dividends are taxable in the hands of the shareholder at their slab rate under the Income-tax Act 1961. The tool models the full cascade: corporate tax on profits, then slab tax on the dividend, which is why extraction through a Pvt Ltd usually carries a higher effective rate than an LLP.
When does Pvt Ltd become cheaper than LLP?+
When profits stay inside the business: the concessional 22% rate under s.115BAA of the Income-tax Act 1961 beats the LLP's 30%, so reinvested profits accumulate faster in a Pvt Ltd. The moment you extract, the dividend cascade erases most of that advantage. This tool toggles between the two modes so you can see the crossover at your own profit level.
Does this tool cover MAT or AMT?+
No — the tool explicitly excludes Minimum Alternate Tax (MAT, s.115JB of the Income-tax Act 1961) and Alternate Minimum Tax (AMT, s.115JC), and it does not model marginal relief. It is a comparative planning estimate, not a tax computation; verify your specific situation with a tax professional before relying on it.