Albert Einstein wisely said,
“The hardest thing in the world is to understand income tax”
In this digital era starting a business has become easier. However, now the difficulty is shifted to continue the business in a planned manner. Today, an entrepreneur has to abide by multiple legal and tax compliances. On the other side, abiding with tax compliances can be stressful for small business owners if not implemented properly.
Therefore, our experiences with our clients say, planning taxes for businesses is crucial to avoid revenue leakages. Paying a significant amount to the government should be the least of the priority for any business owner.
So we thought why not provide you with some right information to save tax for your businesses.
6 Best Tax Saving Tips for Business Owners
Hire any family members and relatives
The simple step to save tax is to hire a family member as an employee. Many new-age business owners are unaware of this important point to save tax. Let me tell you, there is no such difference when you hire an outsider compared to a family member but the tax-paying process becomes beneficial. Family members who don’t have any earnings can be either paid salary or professional fees up to Rs 5 lakhs. This salary or professional fees are paid to employees at the company’s cost, hence this expense can be legally claimed.
Claim business utility expense
If you use your residence as the principal place of business, you can claim electricity bills, telephone bills, etc as utility expenses. Now the benefit here is you can claim your driver’s salary, parking charges, etc also as business utility expenses.
Opt for presumptive taxation
Individual Assesses can opt for presumptive taxation in case their business margins are higher than that specified u/s 44AD & 44ADA. It gives relief to small tax players from the tiring job of maintaining books of accounts & audits. Individual who adopts presumptive tax can declare their income at the prescribed rate. While opting for presumptive taxation, turnover limits should be taken into consideration.
Claim Medical insurance premium
Proprietors can claim their medical insurance premium and can get a deduction in their total taxable income of Rs 50000 per annum. This is covered under section 80D of the income tax act 1961. This section allows you to claim tax deductions of medical insurance premiums for yourself and your family. Hence this proves to be one of the important tax saving tips. Also note, if an entrepreneur is running a startup with a full-time job where the employer provides medical insurance cover, this section is not applicable here.
Provisions for unpaid expenses
Business owners should make sure that accurate provisions are made for unpaid expenses. This can be estimated value based on the expected various expenses that will be incurred till the year-end. This tax saving tip can help you estimate your future tax payments.
Pay taxes on time
As much as it’s said I would like to stress this point that it’s important to pay taxes on time and avoid penalties. These penalties are mostly in the form of monetary means. Hence avoiding late tax filing saves entrepreneurs from bigger penalties.
There are many other tax saving tips for business owners to curtail their business taxes. The above-given points are some of the most frequently applied tax saving tips. If you still have some questions on how to save business taxes, you must seek guidance from your Tax Advisor.