Taxes are an integral part of every registered business. The business owner must file their taxes to the government on time. Taxes are levied on every head of income for a business. Getting the taxes right is essential, and since taxes are always complicated, it is best to get professional assistance. Money saved is money earned. Since taxes are recurring, implementing tax redemption tactics will help your business grow.
Deduct tax at source as applicable
Check with your tax consultant when you purchase any products or services for your business. Several services and products are eligible for a 10% tax deduction at source under different tax heads. If the product or service you want to purchase is eligible for tax deduction at source, deduct it while making the payment. Pay through your company account and save the receipt.
Expenses eligible for tax deduction at source cannot be claimed in tax deduction. So if you miss out on deducting tax while making the payment, it will be an additional tax burden.
Expenses on utilities for operating the business can be claimed. This includes vehicle, phone, salaries of the vehicle driver, parking charges, internet connection charges and electricity bills.
As a business owner, you can claim the utility expenses incurred to set up the business before registration of the business. It can be claimed as a preliminary expense after registering your business and filing taxes.
If your residence is your point of business operation, you can claim electricity and internet connection expenses in your business. These two expenses are not eligible for a claim if the business operates out of a commercial space.
Capital expenses made from the corporate account of the business are eligible for tax deductions. Depreciation can be claimed under the head ‘income of the firm’.
Travel & accommodation expenses
Travel and accommodation of the business owners carried out for business purposes can be written off as a business expense. These expenses can be claimed if the bookings are made from the company’s account and not from a personal account.
Expenses incurred for the marketing of the company are eligible for tax deductions. This includes physical marketing and digital marketing. As the world is increasingly turning to digital platforms, it is wise to invest heavily in digital marketing. However, having the right digital marketing strategy in place is essential to reap its benefits. So, get the best teams onboard.
Medical insurance premium
Business owners can claim any medical insurance policy premium for themselves and their immediate family members. It is capped at a maximum of Rs.25,000 per annum. Please note that the business owner must not be employed at any other registered organization to be eligible for this benefit. It applies only to full-fledged entrepreneurs.
EMI of housing loan
If business owners avail of housing loans from a bank, the installments paid towards the repayment of the home loan can be claimed. A maximum of Rs.1,50,000 can be claimed per annum under Section 80C of the Income Tax Act, India. The business owner must have linked their PAN to their registered company.
Even if you have obtained a housing loan before the commencement of your business, you can claim the EMI payments. This will be considered from the financial year that the business was registered.
Claim depreciation on machinery
The Government of India encourages and supports manufacturing industries. Installation of machinery and equipment is eligible for additional tax benefits. Regular depreciation benefit is an application. In addition, 20% of depreciation can be utilized to install new machinery and equipment.
Payment of municipal taxes
Pay municipal taxes via a bank cheque to keep a record of the transaction in your bank account statement. Save the payment receipts and claim the deduction under income from the House property head.
Deduct income taxable under other heads
Indirect income earned by the company is taxable under different heads. Contact your tax consultant and file taxes for the indirect income under the relevant heads. Also, some of the indirect income sources are eligible for exemption.
Reviewing all income sources of your business with your auditor will give you a fair idea of how much money you will save. Omitting consultation will only avail the tax benefits.
You can claim tax benefits when you donate to registered charitable organizations from your company’s account. A bank statement showing the charity’s donation and a receipt from the trust must be submitted to claim the tax benefit. The Government of India also accepts donations to political parties and charities that are not registered but recognized.
In case you intend to make considerable donations to unregistered charities, it is best to consult your auditor to confirm the acceptance quotient. This makes donating to a registered charity the best option.
The money you save on your taxes can further grow your business. It can also act as savings that the business owner can take home as earnings. All the tax redemption tactics mentioned above will help you have the upper hand on finances.