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Tax Savings Tips for Small Business Owners

  • Highlights

  • Why you should record all your expenses

  • How you can save tax while keeping track of finances

  • The importance of limiting cash payments

  • Importance of filing tax returns properly

Having to part with your hard-earned money is always difficult. While certain factors affecting your net profit are out of your control, one thing that you can do is lower your tax burden. Implement these simple measures and ensure that your business saves as much as it can. Keeping these tips in mind not only helps you save tax,but also helps you keep track of your finances.

Make payments of municipal taxes by cheque:

Cheques are always a better mode of payment than cash. This is because when you pay municipal taxes by cash, you run the risk of losing the receipt. This worsens matters as it robs you of receiving any benefits. Using a cheque, on the other hand, gives you a clear record of the payment in your chequebook. Even if you lose the receipt, you’ll find a record of it in your bank account. This enables you to prove that you made the payment and hence claim a deduction.

Record your expenses:

If you run a packers and movers enterprise, for example, you will have to pay people to drive the trucks, pack and unpack products as well as load and unload the vehicles. If you pay your labourers in cash and don’t maintain a daily or monthly record, you can land up in serious trouble. This is because your business expenses will not be accurate and you will have to pay more in the form of taxes.

Be aware of depreciation cuts:

The tax department provides manufacturing businesses a tax deduction for depreciation of machinery, under sections of the Income Tax Act. In addition to normal depreciation, for new machinery purchased in that year, you can claim additional depreciation of 20%. For example, if you install new embroidery and sewing machines for your clothing business, then apart from the regular depreciation (15%), you can also claim an additional 20% for depreciation in the year when the equipment is put to use. Another section, 35AD, makes total capital expenditure in certain industries tax deductible. So, be aware of the tax laws and file your taxes correctly, so you don’t lose out on these sizeable savings.

Additional Read: All You Need To Know About Income Tax In India

How To Get Small Business Finance From Bajaj Finserv

Dos and Don’ts when applying for a Business Loan

Business loans from Bajaj Finserv are designed specially to help growing businesses meet their financial requirements. Easy to apply for and hassle-free to avail, these loans come with several unique benefits that make them the ideal mode of business finance for small and medium sized enterprises. However, when applying for a business loan, there are certain dos and don’ts that you should keep in mind, in order to ensure that your application is processed smoothly. Here, we tell you what they are.

Dos and Don’ts when applying for a Business Loan

Limit making cash payments:

It may seem convenient to make cash payments, but ensure that they don’t exceedRs.20,000 in a day. The income tax prohibits deductions of expenses when cash payments go beyond this amount.For example, if you have to pay suppliers of cotton, silk and applique patches, split the payment over several days, or, use other sources of finance, such as cheque or electronic transfer to make the payment.

Ensure that you deduct tax at source:

Tax deducted at source helps reduce your tax burden. So, if you fail to do this, it can cost your finances.In fact, there are certain services for which doing this is a mandate as per the IT Act. For example, if you paid a sum of Rs.4 lakh to a recruitment firm to staff your clothes manufacturing facility, and forgot to deduct 10% tax, the entire expense will be inadmissible. As a result, your tax burden will increase manifold.

Be thorough with filing returns:

Filing your returns on time gives the income tax department an accurate picture of how your business is performing. When you file returns on time, you can also enjoy certain perks. For example, if your packers and movers business has made an income loss, you can carry it forward to the next year. You can set it off against next year’s business income, up to a period of 8 years.

Buy a vehicle for your business:

To run your packing and moving business, you will need several business vehicles. But, when you purchase a business vehicle, it will reflect as an asset in your balance sheet. So, you can claim depreciation on it. This is a good way to save money as well as boost your company’s performance.
These tips can easily be integrated into your business’ daily operation. Doing this at every level will help your firm save a sizeable amount when it comes to paying your taxes.When your business is looking for finance to fund working capital, growth, machinery purchase or other expenses too, you save tax on the interest payable on a business loan. So, keep these savings in mind and the make the most of tax deductions.

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