GILTI Renamed to NCTI 2026: Tax Planning for Indian Startup Founders with US C-Corps

If you’re an Indian startup founder operating a US C-Corporation, you’ve probably heard about GILTI. But here’s the thing—GILTI no longer exists. Starting January 1, 2026, it’s been officially renamed and restructured as NCTI (Net CFC Tested Income) under the One Big Beautiful Bill Act (OBBBA).

This isn’t just a name change. The rules have fundamentally shifted, and they affect how much US tax you’ll owe on your foreign operations. If you own a Controlled Foreign Corporation (CFC)—which includes most Indian subsidiaries of US companies—you need to understand NCTI now.

Let’s break down what changed, why it matters for you as an Indian founder, and how to plan strategically for 2026.

What Is NCTI? Why the Name Change From GILTI?

Starting January 1, 2026, what was known as GILTI – Global Intangible Low-Taxed Income – was officially renamed Net CFC Tested Income (NCTI) under the One Big Beautiful Bill Act (OBBBA).

At its core, NCTI is a US tax rule designed to prevent multinational companies from shifting profits to low-tax jurisdictions. If you’re a US shareholder (including green card holders and US citizens) with 10% or more ownership in a foreign corporation, the US IRS wants a piece of that foreign business income—even if you never bring profits back to the United States.

The concept behind NCTI is straightforward: the US government wants to ensure minimum taxation on foreign earnings. Net CFC Tested Income (NCTI) is a U.S. tax rule that requires certain Americans who own foreign corporations to pay U.S. tax each year on their share of the company’s profits, even if they don’t take any money out of the corporation. The rule applies to owners of controlled foreign corporations and took effect in 2026, replacing the old GILTI system.

The Major Changes from GILTI to NCTI in 2026

The transition from GILTI to NCTI involves more than just a name swap. Here are the critical changes that will impact your tax liability:

1. The QBAI Deduction Is Eliminated

Under the old GILTI rules, you could exclude a “deemed 10% return” on your company’s tangible assets (buildings, equipment, machinery). This was called the QBAI (Qualified Business Asset Investment) deduction.

Starting in 2026, the elimination of the Qualified Business Asset Investment (QBAI) deduction means all business income is potentially subject to NCTI, not just intangible income.

What does this mean for you? If your Indian subsidiary has $500,000 in annual profits and previously had $50,000 in tangible assets (10% QBAI carve-out), that $50,000 cushion is now gone. You’ll be taxed on the full $500,000 instead.

2. The Effective Tax Rate Increases from 10.5% to 12.6%

The OBBBA reduces the section 250 deduction rates and makes them permanent. It sets the FDDEI (formerly FDII) deduction at 33.34%, leading to an effective tax rate (ETR) of 14%; and sets the NCTI (formerly GILTI) deduction at 40%, leading to an ETR of 12.6%, for tax years beginning after Dec. 31, 2025.

This increase might seem small on paper, but it adds up quickly. For a $1 million profit, the difference between a 10.5% rate and 12.6% rate is $21,000 per year in additional US tax burden. That’s significant.

3. The Foreign Tax Credit Improves (90% vs. 80%)

Here’s some good news. The percentage of deemed-paid foreign taxes under NCTI that can be claimed as a credit has increased from 80% to 90%.

This means if your Indian company pays corporate tax to the Indian government, you can now credit 90% of those taxes against your US NCTI liability (instead of only 80% under old GILTI rules).

Who Needs to Worry About NCTI?

If you check all of these boxes, NCTI directly affects you:

• You are a US person (US citizen, green card holder, or certain visa holders).
• You own 10% or more of a foreign corporation.
• That foreign corporation is a CFC (Controlled Foreign Corporation), meaning US shareholders collectively own more than 50% of the voting power or value.
• The corporation generates tested income (basically any income that isn’t Subpart F income or effectively connected income).

For Indian startup founders, this typically applies if you have:

• An Indian subsidiary owned by your US C-Corp.
• A US parent company with an Indian operating subsidiary.
• A holding structure where your US company owns shares in Indian entities.

How NCTI Is Calculated: A Simple Example

Let’s say your Indian software company earns $500,000 in annual profit. Here’s the simplified calculation under 2026 NCTI rules:

• Gross Tested Income (after allowable deductions): $500,000
• QBAI Deduction: $0 (eliminated in 2026)
• Net Tested Income before Section 250 deduction: $500,000
• Section 250 Deduction (40%): $200,000
• NCTI Inclusion (60%): $300,000
• US Tax at 21% corporate rate: $63,000
• Less: 90% Foreign Tax Credit: (varies by Indian tax paid)

If your Indian subsidiary paid $50,000 in Indian corporate tax, you can credit 90% of that ($45,000) against your US NCTI tax. Your remaining US tax would be approximately $18,000.

Key NCTI Planning Strategies for Indian Founders

Strategy 1: Maximize Foreign Tax Credits

The improved 90% foreign tax credit is your biggest planning lever. Under the 2026 rules: 40% 250 deduction for NCTI (yielding an approximate 12.6% effective US corporate rate before credits), and a 90% indirect FTC cap for qualifying corporate/§962 treatment.

If your Indian subsidiary’s effective tax rate is 14% or higher, you may completely eliminate your US NCTI tax. India’s corporate tax rate (after considering applicable surcharges and state taxes) can often reach this threshold.

Strategy 2: Take a Reasonable Salary

If you’re actively working in your Indian subsidiary, pay yourself a market-rate salary. If they pay themselves a $200,000 market-rate salary, the CFC’s tested income drops by that amount, reducing the NCTI base. The main guardrail is that compensation must be commercially reasonable and compliant with local employment laws – artificially inflated salaries will not hold up to IRS scrutiny.

This reduces your company’s tested income and directly lowers your NCTI base.

Strategy 3: Consider the High-Tax Exception

If your foreign corporation pays at least 14% in foreign taxes, you may completely avoid NCTI through the high tax exception election. This is an all-or-nothing election, but for many Indian operations it’s a game-changer.

Strategy 4: Proper Entity Structure

Review your ownership structure. Different entity types (C-Corp, S-Corp, partnership) have different NCTI treatments. If you haven’t yet formed your US company, consulting a professional on GILTI and FDII rules for 2026 can help optimize your structure.

Compliance Requirements: Reporting NCTI

Starting in 2026, NCTI must be reported on Form 8992 (Section 250 Deduction for GILTI—now NCTI). This form is filed with your annual tax return.

You’ll also need:

• Form 1120-F (if you’re a foreign corporation filing with the US).
• Form 5471 (Information Return of US Persons With Respect to Certain Foreign Corporations).
• Support for foreign tax credits and NCTI calculations.

Given the complexity of NCTI calculations and the significant dollars at stake, most Indian founders benefit from working with a US international tax specialist.

How e-startup.io Can Help

At e-startup.io, we specialize in helping non-US founders like you establish and optimize US business structures. Our service includes guidance on C-Corp formation, EIN registration, and proper structure setup to minimize tax exposure.

While we focus on the company formation side, we recommend coordinating with a specialist tax advisor on NCTI planning. Our team can ensure your US C-Corp is properly established and documented—which is essential groundwork before you tackle NCTI tax planning. Many Indian founders who delay setting up their US entity properly end up with compliance headaches and higher tax bills down the road.

Additionally, if you’re concerned about other compliance requirements for foreign-owned entities, we have detailed resources. For instance, our guide on Form 5472 compliance covers foreign-owned entity reporting requirements and penalties, which complements your NCTI planning.

Critical Deadlines for 2026

• January 1, 2026: NCTI rules take effect for tax years beginning after December 31, 2025.
• April 15, 2027: Deadline to file 2026 tax returns with NCTI calculations.
• June 15, 2027: Automatic extension deadline for US expats filing overseas (if applicable).

NCTI Planning Isn’t One-Size-Fits-All

Your specific NCTI exposure depends on many factors:

• How much profit your Indian subsidiary generates.
• India’s effective tax rate on your business.
• Whether you take a salary from the company.
• The structure of your US parent company.
• Ownership percentages and voting rights.

Before January 1, 2026, spend time modeling scenarios. If your Indian subsidiary is currently making $250,000 profit and India’s tax rate is 30%, your US NCTI tax exposure might be minimal or even eliminated through foreign tax credits. But if your effective Indian tax rate is 15%, you’ll face additional US tax of 10-12% on top.

For more context on how international tax rules interact with your US business structure, our guide on Form 1120 vs. Form 1065 filing can help clarify which return type applies to your situation.

FAQ: NCTI for Indian Startup Founders

Q1: Does NCTI apply to my Indian subsidiary even if it has losses?

NCTI only applies when your CFC has net tested income (profits). If your Indian subsidiary is operating at a loss, there’s no NCTI inclusion that year. However, you can carry forward losses to offset future years’ NCTI.

Q2: Can I avoid NCTI by not taking dividends from my Indian subsidiary?

No. This is the key difference between NCTI and old dividend withholding taxes. NCTI requires you to pay US tax on the subsidiary’s profits annually, regardless of whether you bring money back to the US. The tax is imposed on “inclusion,” not on actual distributions.

Q3: What is the effective difference in tax cost between GILTI and NCTI for a $1 million profit?

Under old GILTI (10.5% rate with QBAI deduction), a $1 million Indian subsidiary profit might have had a $60,000-75,000 NCTI inclusion (after the QBAI carve-out), costing roughly $10,500-15,750 in US tax (before foreign tax credits). Under new NCTI (12.6% rate with no QBAI), the full $1 million is at risk, costing approximately $126,000 in US tax before the 40% Section 250 deduction and foreign tax credits. The difference is substantial—potentially $15,000-30,000 more in US tax per year depending on foreign tax credits.

Q4: How does the 90% foreign tax credit help if India’s corporate tax is 30%?

If your Indian subsidiary pays 30% in corporate tax, that rate exceeds the 14% US threshold needed to eliminate NCTI entirely through the high-tax exception. You’d owe $0 US tax on NCTI. But if India’s rate is 12%, you don’t qualify for the exception. The 90% credit means you can apply 90% of the 12% Indian tax ($10.8%) against your 12.6% US rate, leaving only 1.8% of profit subject to US tax.

Q5: Should I restructure my US C-Corp before 2026 to avoid NCTI?

Possibly. Some founders explore check-the-box elections (treating a single-member CFC as a disregarded entity) or other structures. However, restructuring after significant profits are earned raises red flags with the IRS. If you haven’t yet formed your US company, now is the right time to plan properly. Once the company is operating, retroactive restructuring is difficult. For setup guidance that considers future tax implications, work with a specialist.

Your Next Steps

NCTI is here, and 2026 is your planning year. Here’s what you should do:

1. Review your US entity structure. Confirm you have a proper US C-Corp or appropriate entity type for your goals. If you don’t yet have a US company established, e-startup.io can help you form one correctly—visit e-startup.io today to get started.
2. Calculate your expected NCTI exposure. Work with a US international tax advisor to model your 2026 NCTI liability under the new rules.
3. Explore planning strategies. Whether it’s maximizing foreign tax credits, adjusting compensation, or evaluating the high-tax exception, planning now saves thousands later.
4. Ensure compliance documentation. Gather records needed for Form 8992, Form 5471, and foreign tax credit calculations.
5. Stay updated. NCTI rules are new, and IRS guidance is still evolving. Check for updated Form 8992 instructions and any clarifying regulations.

Don’t navigate NCTI alone. The interaction between US tax law and Indian corporate tax creates complexity that requires expertise. If you need help setting up or optimizing your US C-Corp structure to work with your NCTI strategy, contact e-startup.io today. We specialize in helping Indian and other international founders establish US companies the right way—which is the foundation for successful tax planning.

Your NCTI planning starts with having the right structure in place. Let’s get yours set up correctly.