US tax 2026, what Indian founders need to know.

21% federal corporate income tax under IRC Section 11 remains the headline rate for US C-Corporations in 2026. For an Indian founder's Delaware C-Corp with any US-source Effectively Connected Income (ECI), the 21% applies to taxable profits.

Add on top:

• State corporate tax — Delaware 8.7%, California 8.84%, New York ~6.5-7.25%, Texas no state income tax but 1% franchise tax, Wyoming no state corporate tax. Delaware incorporation + foreign qualification in operating states means tax layered by economic nexus.
• GILTI (Global Intangible Low-Taxed Income) — if the C-Corp owns 10%+ of a non-US subsidiary with low-taxed income (which an Indian subsidiary of Delaware C-Corp often qualifies as), GILTI inclusion applies. Section 250 deduction + foreign tax credit mechanics determine actual US tax impact.
• Branch profits tax — for US branches of foreign corporations, additional 30% branch profits tax (reduced to 15% under India-US DTAA Article 10).

For a Delaware C-Corp with Indian founder owners and Indian subsidiary, the key planning questions: ECI classification of US-source services, transfer-pricing documentation for inter-company flows, FTC co-ordination for GILTI, and dividend-withholding on upstream flows to Indian individual shareholders (15% under DTAA Article 10 beneficial-owner test).

IRC Section 1202 Qualified Small Business Stock provides up to 100% exclusion of capital gains on qualifying C-Corp stock held for 5+ years, up to the greater of USD 10 million or 10x the taxpayer's basis per issuer.

Key requirements:

• C-Corp stock — not LLC member units, not S-Corp stock, not warrants.
• Acquired at original issue — not secondary purchase from another shareholder.
• Company gross assets ≤ USD 50M immediately after the stock issuance (and before, aggregating prior issuances).
• 5-year holding period from issuance to sale.
• Active business requirement — 80%+ of company assets used in a qualified trade or business.
• Taxpayer must be non-corporate — individual, trust, or partnership. Corporations don't qualify.

For Indian-origin founders who become US tax residents (via H-1B, L-1, green card, or marriage), QSBS is one of the most valuable US tax provisions available. For founders who flipped early to Delaware and the stock has grown materially, the 5-year clock from flip date is what you count. Flipping early starts this clock earlier.

Non-US-resident Indian founders generally do not benefit from QSBS directly (their capital gains on US stock sale are governed by India-US DTAA Article 13, which assigns taxing rights based on residence). But if they later move to the US and become US tax residents, holding the Delaware C-Corp stock positioned for QSBS creates optionality.

IRC Section 83(b) allows a holder of restricted stock subject to vesting to elect to be taxed at the grant date on the then-FMV, rather than at each future vest date on the then-FMV. For founder restricted stock issued at nominal FMV (day one incorporation), 83(b) locks in near-zero taxable basis.

Mechanics:

• Must file within 30 days of restricted-stock grant. Unrecoverable if missed.
• Mail by USPS Certified Mail with Return Receipt to the IRS Service Center listed in current Form 83(b) instructions.
• Provide copy to the issuing company.
• Retain Certified Mail receipt + Return Receipt as proof.
• Required for QSBS 5-year clock to run cleanly (holder recognised as owner from grant).

For Indian founders in a flip or new Delaware incorporation, 83(b) is the single most critical founder-equity administrative task. BQP's standard engagement includes 83(b) preparation and Certified Mail filing with retained acknowledgement.

For Indian-origin founders who become US tax residents or US citizens, US estate tax applies on worldwide estates above the federal exemption. The exemption amount has fluctuated through the 2017 TCJA framework and its extensions / modifications. As of 2026, the exemption remains at a level that insulates most mid-net-worth founders but can bite at scale.

Key planning tools:

• Spousal portability — doubles the exemption for married couples with proper election at first-spouse death.
• Lifetime gifting — USD 18,000+ per year per donee annual exclusion; use before full exemption applies.
• Grantor-retained annuity trusts (GRATs) and dynasty trusts for high-growth-potential assets.
• India-US estate tax treaty — India does not have an estate tax treaty with the US, so Indian-residence does not shield from US estate tax on US-situs assets held by a US-citizen or US-tax-resident founder.

For Indian-origin founders considering green card or citizenship, estate planning should start before the status change — options narrow substantially once US-citizen or domiciled status attaches.

India-US DTAA (signed 1989, in force since 1991) remains the operating framework for cross-border flows between the two countries. Standing provisions:

• Dividend 15% / 25% (beneficial-owner 10%+ holding tests)
• Interest 15%
• Royalty / FTS 15% (with specific carve-outs)
• Capital gains assigned to residence country for most assets (specific real-property-rich carve-outs apply)
• Article 15 salary: taxing right generally to country of services
• Article 25 FTC: available in both directions to avoid double taxation

Form 10F + TRC (Tax Residency Certificate) workflow unchanged. Section 195 TDS at treaty rate when Indian-source payment goes to US-resident; W-8BEN at reduced withholding when US-source payment goes to non-US-resident Indian.

Full guide: India-US DTAA Withholding Rates.

Last updated: 2026-10-09.