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Tax Saving Tips

17 Tax-Saving Tips For Small Business Owners

Business is not only keeping doing business but more than controlling and monitoring each and every factor which can affect the business’s profitability, because the business’s ultimate goal is profit maximization. 

17 ways to save on business taxes

As a business owner, you have income from almost every head except the head “income from salaries”.

You should be aware of tax-saving options otherwise you will pay only taxes to the government. 

1) File income tax return on time

Filing income tax returns on time will avail many benefits like carrying forwards the losses of business income but this facility is only available when your file your income tax return on time or before the due date. 

2) Life insurance premium

The life insurance policy provides security to your family but this policy has major benefits like return on your investments. 

One major benefit of life insurance premiums is the exemption of 8OC on your life insurance and also the spouse and children whether dependent or not but the deduction is subject to the maximum cap of Rs 150,000/. 

3) Investment in PPF 

Investment in public provident fund schemes is one of the oldest and most successful schemes run by the government of India.

PPF is offering a handsome rate of interest equal to the fixed deposit interest rate offered by the scheduled banks and offers claim deductions up to Rs 150000/ under 80C. 

4) Medical insurance premium 

Now medical insurance policy is offered by leading insurance companies, scheduled banks, and non-banking financial institutions.  

In this process, medical insurance premiums paid by self, spouse, dependent children, and parents can be claimed under 80D maximum cap Rs 25000/. 

5) Pay advance taxes 

If you think that you simply are vulnerable to paying self-assessment tax even when claiming credit of TDS, then you must deposit advance taxes to the credit of the Central government in keeping with percentages as prescribed at regular intervals. 

Non-deposit of service tax can end in interest below sections 234A, 234B & 234C, and these interests area units to be deposited obligatorily because the department doesn’t show any leniency in relation to these interests.

6) Mutual fund SIP 

Mutual fund sale people will explain to you the proper tax treatment of your mutual fund SIPs and keep on saving that if units are sold after 12 months, then capital gains shall be exempt. 

Still, it is partially true and the fact is when you start a SIP each installment is considered a separate investment. 

Once twelve months the primary installment you’ve got paid has solely exceeded an amount of twelve months and different eleven square measure is still short in nature, and STT paid financial gain is exempt provided that it’s long.

7) Cash payments limit 

You should neglect cash payments of more than 20000 in a day to a single person because income tax does not allow if paid more than 20000 in a single day to a single person. 

8) Deduct tax at the source 

Tax deductions at source always do this when you do any kind of payment of commission @7.5 % as TDS from any payment to the agent and if you will not do so the end-of-the-year tax burden will be high do it through the bank transfer or cheque. 

9) Depreciation

The income tax act provides multiple edges to producing enterprises, for instance, further depreciation, mere business beneath section 35AD, etc. within the case of a producing enterprise, if a chunk of the latest machinery is put in throughout the year, then added to the conventional depreciation, such units are eligible to assert further depreciation up to twenty within the year once the machinery in the place to use. 

10) Records of cash expenses 

We know that few businesses in the country are labor-intensive and wages of unorganized labor are mostly paid in cash like marble and tile industry, sanitary, cement, etc. 

Factory floor & other indirect wages account for at least 40% of your manufacturing expenses and improper recording of such payments results in higher profits as a consequence of under-recording of expenses, thus resulting in a higher amount of taxes burden on owners. 

11) Payment of municipal tax by cheque 

Municipal taxes paid during the year will be claimed as a deduction from income from house property and for that benefit, you must pay your municipal taxes through cheque and keep a receipt of that, in case you lost the receipt no problem you can recollect detail from your bank statement. 

12) Interest on housing loan exemptions 

You should take bank finance while purchasing a home and no need to ignore it because, From the tax POV, you will be eligible to claim associate in nursing interest as a deduction from house property and claim principal as a deduction beneath section 80C together with different deductions that area unit restricted to a most of Rs 150000/. 

13) Long-term and short-term capital gain treatment 

In the case of long-term capital gain, any capital gain control for over thirty-six months is categorized as a long-term capital gain and on the sale of such capital future financial gain arises. 

14) Treatment of cost of gifts and donation 

Cost of gift and donation or charity come under the exemption but there are certain rules and guidelines about the eligibility. 

15) Advice from a qualified tax advisor 

Advice from a qualified tax advisor will be much beneficial in terms of saving from tax liability and educating about how to do any types of payment that are not related to the business process or not have a receipt. 

16) Fund a retirement plan 

Fund retirement plan comes under the tax exemption and any kind of payment in a government pension plan comes under the exemption. 

17) Write off bad debts to reduce income 

Write off bad debts that will directly impact your income and if you have such types of bad debts do it too that will reduce your income. 

Final Thoughts on Small Business Tax Strategies

You should be proper attention to changing norms and government guidelines about taxes.

You must take the support of experts, and tax professionals, and educate yourself to reduce the burden of taxes at ends end of the financial year. 

Keep a record of your cash expenses and do some life insurance, health insurance, PPF, NSE(national saving certificates), purchase property on bank finance, and perform your best.

Accounting software is one of the key factors in the success of the organization and in making the organization more effective and productive. 

Growing digitalization has created startups opportunity and built a world that is more communicative and engaging. 

There are vast numbers of accounting software available for small, prominent, and freelancing entrepreneurs. 

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Article 10 methods of finance for your business will be insightful and explore the source of fundraising for your business. 

There are many ways businesses can raise funds for expansion, growth, asset purchase, and achieve success height.

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