Tax Saving Tips For A Business Owner

In today’s scenario where doing situs slot online business has become more stringent due to the mandatory requirement of complying with multiple & complex laws, taxation law is something you should outsource to an expert. Taxation laws not only in our country, but all over the world are complex and not everyone’s cup of tea. As a business owner, you have income from almost every head except from the head ‘Income from Salaries’. If you are not aware of tax saving options, you might end up paying significant amount of taxes to the government every year.

In this article, I will discuss 20 tax saving tips that every business owner and startups should follow to avoid unnecessary taxes. I will also share best practices to maximize your investments, as profits are temporary and wealth is permanent.

Income From House Property

1) Claim benefits of interest on housing loan

Some people avoid availing bank finance for building houses, but the fact is that availing home loans can be beneficial in many ways. From the tax POV, you can claim an interest as a deduction from house property and claim principal as a deduction under section 80C along with other deductions which are limited to a maximum of Rs 1,50,000/-. Gross value for tax purposes is taken as NIL and claiming deduction results in loss under the head ‘Income from house property’ and can be set off against incomes of other heads resulting in lesser overall taxable income.

2) Pay municipal taxes by cheque

Municipal taxes paid during the year can be claimed as a deduction from income from house property. People often pay municipal taxes in cash and do not keep a copy of receipts of the same. However, making payment of municipal taxes allows you to claim its deduction and can be claimed even if you have lost the receipt as the same will be reflected on your bank statement.

Income From Business Or Profession

3) Proper recording of cash expenses

Many businesses in the country are labor intensive and wages of unorganized labor are generally paid in cash. Factory floor & other indirect wages account for at least 40% of your manufacturing expenses and improper recording of such payments result in higher profits as a consequence of under-recording of expenses, thus resulting in the higher amount of taxes. For example, in a factory around 50k a month paid as loading and unloading charges remain unrecorded due to non-maintenance of the proper register. This results in under recording of expenses by 600k, leading to extra payment of taxes by 180k (assuming a tax rate of flat 30%). Proper cash receipts with signature/thumb impressions of laborers should be maintained with wages register so that proper deduction of the same can be claimed.

4) Stock Valuation

Stock is normally valued at cost, but stock which has short shelf life should be valued on the principle of Cost or NRV whichever is lower. Net Realizable Value provides the actual realizable value of stock and hence, prevents the stock from getting overvalued, which ultimately reduces taxes. However, the practice of such valuation should be consistent throughout the years to avoid the unwanted attention of the income tax officials.