Running a business in India isn’t easy. There are many complexities around it and every business owner ends up paying huge amounts on tax every year. Even after GST there are many layers attached to it and the additional taxes are also unending. Tax evasion is not a healthy practise but under the Income Tax Act, 1961, there is a lot one can do to save. Here are some tips for the owners who wish to save tax and money through some smart practices:
According to the Income Tax Law business owners can claim deduction on expenses incurred towards running their unit. The expenses here are looked at as revenue deduction and reduces tax liability. In order to do so the records have to be properly structured and well maintained.
Income Tax Department allows new entrepreneurs to divide the initial set up cost in five instalments from the moment of their inception. This also includes research expenses like project report, market study and other expenses that are accountable for the five instalments under section 35D to save money.
Many people start off by making their homes as offices to limit initial expenditure. In this case too, tax burden can be reduced by showing utility bills, mortgage and property tax. One can even make a rent agreement with the owner of the house and maintain the rent record as business expenditure.
High Value Items
On starting a business, people have to make expenses towards, computers, printers, furniture etc. and keep them as their fixed business assets. Over the years the value of each items can be depreciated and the capital spent on each item will help to save tax.
Running a business involves meeting and interacting with people to build connections. Entrepreneurs are known to throw special parties, team building activity for better output. To save money, the bills can be kept from these occasions and added to the accounts accordingly for income tax deduction.
A business owner can claim up to Rs 15000 for income tax deduction on medical insurance under Section 80D. According to this law, he/she can claim deduction on the premium amount for his/her spouse, dependent children and parents.
Hire a Family Member
Hiring a family member who can assist you in your business activities can help you reduce your tax liability to a great extent. If the hired family member is not in the income tax bracket or at the lower tax brackets, the combined tax liability of the family comes down considerably. However, it is to be noted that you cannot breach certain fundamental norms in order to minimize your tax outgo.
Take benefits of penalty relief If eligible
Despite your efforts to reduce your tax liability, you may incur an IRS penalty. If that happens, you must check whether you are eligible for penalty relief.
Certain penalties, such as penalties for failing to file a tax return or delaying tax payment, are eligible for penalty relief. You will be able to avail penalty relief if you have tried to follow the legal requirements but were unable to meet them because of unavoidable circumstances, or you were able to resolve an issue pointed out in your penalty notice.
A smart business owner is someone who keeps his/her funds aside for tax returns and his/her papers sorted before the due date. Filing for returns last minute can be very cruel and exhausting, and, can also hamper the cash flow. A business owner must pay his taxes on time, to avoid any kind of penalties, fines and interest for late-filing.
Availing A Business Loan
According to income tax act, one can avail tax benefits on business loan interest rate and its tax deductible. As the loan interest is the additional amount that the borrowers are required to pay for the purpose of borrowing money.
With Finserv MARKETS, applying for a business loan is easy, convenient and completely hassle-free. What’s more? You can avail a plethora of other benefits along with tax benefits right from the comfort of your home. So why wait? Apply for a business loan with us, today!
Do you know that you can also get tax benefit on personal loan if it is used for business and other purpose. To know more visit Finserv MARKETS
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