Income Tax Saving Tips
The government of India has simplified the process for filing tax returns. It also introduced a few new deductions that can help you save on taxes and increase your savings if you are eligible to use them.
We’ve compiled some quick tips and tricks, so read through these ideas and see which ones will work best for you!
The best way to save income tax is by knowing the basics of taxation. Before filing your income tax return, make sure you have the following documents:
You should never delay in filing The Income Tax Returns. Delay can lead to penal actions like imposing interest and penalty.
With a little bit of knowledge and preparation, you can enjoy the benefits of tax saving for small businesses in India.
These ideas may work well with other finance-related goals too, so feel free to use them even if your intentions are lowering debt or building up savings.
They’ve helped us be more successful on our journey to financial independence!
While it may seem like a complicated and overwhelming process at first, understanding how to save money on taxes can be easy with the right knowledge.
Ways for saving taxes for Entrepreneurs and small businesses:
Here are some tips to help save income tax for entrepreneurs or those who run their own business as a sole proprietor.
1. Record All your Business-Related Expenses
It is very important to record all your business expenses. You can do this by maintaining a complete record of the expenditure you made for your business.
This includes expenses on purchase of assets as well as operational expenses. Any expense which is directly or indirectly related to your business can be classified as a business expense.
2. Digital Transactions
E-payments have become an integral part of our daily life. Using e-wallets for money transfers saves you from the trouble of carrying cash and reduces your transaction costs.
However, make sure that you retain all your e-wallet statements in order to claim the business related transactions done through e-payments.
3. Mutual fund SIP
Mutual funds are one of the most popular forms of investments. If you are planning to save a lot of money in a mutual fund, then it is advisable that you start an SIP.
Mutual fund SIP is a systematic investment plan, which allows you to invest a fixed amount of money every month without worrying about the fluctuations in the stock market.
4. Get a Business Loan
It is advised that you get a loan for your business rather than taking out an expensive personal loan.
Business Loan is taxable under income tax, but it is still much beneficial than taking a personal loan which has interest rates up to 30% per annum.
Depreciation is an income tax deduction which allows you to write off the total cost of any plant or machinery purchased by your business.
Doing so, you will be able to claim a deduction on the cost of asset. However, there are limits for this deduction.
6. Employ a Family Member
If you hire your family member for your business, then they can be exempted from paying taxes on the income you earn.
As long as the family member is an employee of your business and they are drawing a salary, they can be exempted from paying income tax.
7. Make use of GST exemptions
By simply following the correct procedure, you can claim various exemptions available under GST law.
If you don’t claim the exemption, then you will have to pay 12% tax on your supply.
8. Life Insurance Premiums
Life insurance premiums paid for self and spouse can be deducted from the taxable income under section 80C of income tax.
9. Investment in PPF
Public Provident Fund or PPF is a popular investment vehicle. You can deduct the amount you have deposited for 12 months from your taxable income under section 80C of income tax.
You can even claim deduction on the interest accrued on your PPF account under section 80C of income tax.
10. Avoid Penalty for Late Filing
You should file your income tax return on time. However, if you fail to do so then, there will be a penalty for late filing, which can be up to Rs. 5000.
11. Start a Retirement Plan
Making tax-free investments in retirement plans can save you a lot on your tax outgo.
You can even claim deduction of up to Rs 1,50,000 under section 80C of income tax for contributions made to retirement plans.
12. Save Money for Healthcare Needs
By setting aside money towards healthcare expenses, you will be able to claim deduction of up to Rs 15,000 under section 80D of income tax.
13. Mutual fund SIP
Mutual fund SIP is a systematic investment plan, where you can invest a fixed amount of money every month without worrying about fluctuations in the stock market. SIP is a safe and easy way of investing your money for the long term.
Under income tax, you can adjust the cost of certain assets so as to reflect the impact of inflation. Doing so will help you save on your tax outgo.
Income Tax Saving Tips – What is the best way to save income tax for Small Businesses & Entrepreneurs in India?
Under income tax, you can claim deduction of your donations made to certain charitable organizations. However, there are limits for this deduction.
- Record All your Business-Related Expenses
- Don’t Miss out on Depreciation Costs
- Adopt Digital Transactions
- Deduct Tax at Source
- Get a Business Loan
- Invest More in Marketing
- Correctly Deduct Tax at Source
- Housing Loan
- Digital Transactions
- Avoid penalty for late filing
- Save Money for Healthcare Needs
- Employ a Family Member
- Start a Retirement Plan
- Deduct Travel Expenses
- Avoid cash payments
- Make use of GST exemptions
- Investment in PPF
- Life Insurance Premium
- Hire services of an expert
- Valuation of stock
- Long term and short-term capital gains
- Mutual fund SIP
We’ve provided some tips for saving income tax that will help keep more of your earnings safe. What are you waiting for? Start following these simple steps today!
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