10 Pointers for Lowering Business Taxes

Tax deductions may be quite beneficial for you as a small company owner. Planning carefully will allow you to lower your taxable income. Here are 10 suggestions to help you lower your company taxes.

For a company or a small business, filing business taxes is a demanding task. Nobody likes to give the government their hard-earned money. However, income tax is a hard reality that company owners must also come to terms with. Even if you cannot avoid this obligation, you may come up with strategies to lower your tax obligations.

Here are some suggestions on how to reduce your taxes as a business.

1. Employ a relative

One of the most effective strategies to reduce company taxes is to hire a family member.

Hiring their spouses into the company is another way small business owners may lower their taxes. Since the corporation is responsible for paying these taxes, they can be excluded from taxable revenue, which lowers the overall expenditure of the company.

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2. An account for retirement

When it comes to retirement savings, there are several retirement plan alternatives with the greatest advantages. They also have several tax advantages that can be highly beneficial. The IRS website offers a wide variety of retirement plan alternatives that can be quite advantageous for small company taxation.

3. Costs for utilities

You can classify these costs as utilities or business expenditures if you're an entrepreneur who uses your phone and car for proper business purposes. These costs may include recurrent charges, convenience costs, or preliminary costs. This is one of the most helpful tax advice because by classifying these costs as company expenditures, you may lower the tax burden on your small enterprises.

4. Hotel and transportation costs

Entrepreneurs frequently need to travel between locations for business-related tasks. One piece of advice for lowering small business taxes is to always utilize the company's account rather than your personal one for such costs.

For instance, if your annual salary is Rs. 20 lakhs, your firm account shows that you have spent about Rs. 5 lakhs on this charge. In this case, the travel costs can qualify as business expenses and be free from taxes. In this case, you would only be required to pay tax on the remaining 15 lakhs rupees.

5. Cost of Medical Insurance

Entrepreneurs are eligible for tax deductions for medical insurance premiums under Rs. 25, 000. This insurance can be for the entrepreneur's dependant parents, spouses, or children and is deductible under Section 80D of the Indian Income Tax Act. However, this tax advice won't apply to company owners whose companies are their second jobs and whose employer already pays their medical insurance costs.

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6. Put your money to work in marketing

You must abandon outdated outbound marketing strategies and switch to digital and inbound marketing for your services and goods in this era of digitization. This offers two advantages.

First of all, inbound marketing will expand the reach and growth of your company. Second, since all of your marketing costs are tax deductible, they serve as tax-saving advice. As a result, you may also save money in this regard. So, to save on taxes, put any spare cash you have at the end of the year towards marketing and advertising.

7. Steer clear of cash transactions

According to the Indian Income-tax authority, if your cash transaction, as per your books, is more than Rs. 20,000 per day for a single individual, your transaction would be void.

You will be paying more in taxes for your small business as a result of this nullification than you otherwise would have. Try to do any transactions worth more than Rs. 20,000 through a bank. As a result, you will pay the same amount of tax that you would have otherwise rather than an excessive amount, which would ease your financial strain.

8. Depreciation

Adding to the depreciation already taken into account might also lower corporate taxes. This is so that an entrepreneur can take advantage of section 35AD's 20% increased depreciation provision if they install new machinery throughout the year. This is another suggestion for easing the burden of taxes.

For instance, suppose you purchase new equipment and deduct the standard 25% depreciation but neglect to deduct the additional 20%. In this case, the 20% tax rise resulted in more taxes being paid, and as the greater depreciation can only be claimed in the first year, it was a lost opportunity. So keep this tip in mind while setting up new equipment.

9. Lending

Another excellent tax-saving advice is to donate money to a good cause. This is unique advice since it allows you to do good deeds while still reducing your tax liability. However, you may only reduce your tax burden by giving when you are giving to charities that are registered with the IRS. If you give to registered charities, political parties, or the PM Relief Fund, you are eligible to receive a 100% tax deduction.

10. Interest on mortgage loans

One of the best tax advice is that if your start-up is linked to your PAN card, you can deduct the interest you spend on your home loan from your income tax.

By including the interest on any home loans, Section 80C allows for a tax deduction of up to Rs. 1.5 lakhs each year. This advice should persuade you to take out a bank loan to construct or purchase a home since it will lower your tax obligations.

The Conclusion

As long as you make good plans, there are various strategies to lower company taxes. As a small company owner, lowering your taxable revenue may be quite beneficial.