Introduction:
As we all know Government is taking strict actions and making strict laws to tackle tax evasions and to take out all black money. As an ethical or legal business practice, no one should involve themselves in tax evasion activities. We understand the taxation law and system in our country are so stringent that it is impossible for the businessman to handle and manage their business according to the law on their own and they need to outsource an expert in order to comply with various statutory compliances.
In order to support our small business clients we AKT Macs are here to extend our support to Plan their tax in such a manner that without hampering any taxation provision, minimum tax liability could be assessed and various suggestions and tax consultancy have been provided by our team during the year on a real-time basis so that they never feel helpless while taking decisions in their business from the tax compliance point of view. So, in this article, we will discuss just basic tax planning decisions that are beneficial for small businesses and their owners.
Income under head House Property:
- Municipal Taxes Payment: Most of the house property owners are not maintaining records of their municipal tax payments as they are not aware of the benefit of this. Keeping records of municipal tax payments is beneficial as it is allowed as deduction while calculation income under head house property and ultimately reduces your tax burden.
- House Loan Principal/ Interest payment: Many of the small business owners and middle-class persons think it against their fame to obtain a loan for house. But, here are a lot of benefits of getting a house loan not just you get financial assistance from the bank to get your own house, but you also get various exemptions and deductions which ultimately lower tax burden on you. Principal repayment of house loan is allowed as a deduction under Section 80C up to Rs. 1.5 lakhs . Interest payment is allowed as deduction under Section 24b. Also, there is a new additional Deduction under Section 80EEA to home buyers up to Rs. 1,50,000 which can reduce your tax burden to a large extent.
Income from Business and Professions:
- Proper compliance with respect to the deduction of TDS: It has been observed that many of the small business houses are not generally aware of the fact that when they are liable to deduct TDS and require to register themselves as Deductor with Income Tax department. This negligence of deducting TDS results in disallowance of the whole expenditure which has been incurred without deducting Tax even if it is paid by cheque and you have all the records of the payee. But since you did not deduct tax at source, your whole expense will be disallowed and may result in a penalty. So, you must take care of this in order to comply with taxation provisions.
- Avoid making expenses payment in Cash: As we are generally dependent upon cash transactions and mostly make cash payments irrespective of the amounts and government is also not able to keep tracks of the payees and resulting in the creation of black money in the economy because the payee generally not having any electronic record f the transaction avoids showing that as his income. So, to stop these practices and promote the digital economy there is the disallowance of any cash expense for a transaction made in any single day Exceeding Rs. 10,000. Previously this limit was of Rs. 20,000 but to encourage digital transactions this limit is reduced to ten thousand and any expense incurred in cash above this limit then it will be disallowed and your business income will be enhanced by such amount. So, it is advisable to avoid payments in cash.
- Additional Depreciation for New Machinery: Everybody is aware of claiming 20% of the depreciation for pieces of machinery but the government has also provided a benefit by providing additional depreciation for installing new types of machinery for manufacturing business of 15% which can be skipped by many business houses due to lack of knowledge and lack of professional guidance.
- Deduct Incomes taxable in other heads from business Income: Every head has its own exemptions and deductions linked with. If you have income from business and house property and even interest income from a savings account, and you think that tax is equal and no matters you are considering it in your business income then you are wrong here. Income from house property is covered by deduction under section 24 and you are missing that 30% deduction from your rent in case you are showing it under business income.
Also if you have interest from saving bank account then also that should be shown under income from other sources and not in your business profit and loss account because it is also allowed as a deduction under section 80TTA up to Rs. 10,000. So, you are missing these benefits if you are just adding up all your incomes in your business profits.
- Carry forward of losses: There are so many due dates in Income Tax as most of the business houses are not able to retain that in mind and skipped those due dates and resulting they can face huge loss for that. In case you file your income tax return after the due date then you are not able to carry forward your losses which are generally allowed to carry forward for 8 consecutive years.
- Try to accept digital payments: There are many business houses that are following the presumptive taxation scheme. Previously you have to just consider 8% of your gross receipts as your profits and pay tax on that 8% portion only irrespective of your actual profits. But, in case you are accepting payments digitally then your deemed profit will be 6% of gross receipts. So, it is suggested to accepts as many payments through digital mode as it is more secure as well as beneficial to lower tax also.
Other Final Important tips to be kept in mind:
- Pay Advance Tax: In case you are liable to pay self-assessment tax even after TDS then you must pay tax in advance to the government in order to avoid interest as interest is mandatory need to be paid if you are delaying payment of tax and not paying tax in advance.
- Keep yourself updated with recent tax developments: Only filing returns and paying taxes is not only important, but You must also be aware of the recent decisions and tax advancements in the system so that you can proactively take your business decisions and run it as per the latest regulations.
So, by concluding we must say that it is not possible or we must say is difficult for every businessman to keep yourself updated from every tax update without any professional advice. So, you can seek assistance or consultancy from our AKT Macs service which not only guide you in taking business decisions but also keep you updated with various government tax reforms and tax planning for your business so that you can save tax by utilizing benefits provided by the government which could be missed out without expert advise and ultimately cost your business by paying more taxes.