Let’s face it! Whether you own a start-up or a large-scale company, you will need working capital to not just stay in business but also grow. Therefore, proper financing is of the utmost importance for any venture. Fortunately, with widely available and easily accessible business loans, you can now get the working capital you need without jumping through a lot of hoops.
Other than funding, business finance also comes with a ton of tax benefits, allowing you to maximise your profits. However, it’s important to understand the various aspects of loan taxation to make the most of the benefits.
To help you out, here are some of the tax benefits for business loan 2022you can avail of.
Tax deductions on interests
Loans for business use are tax-deductible in India as per the provisions listed under the Income Tax Act, 1961, especially the interest part. Yes, you can easily write off interest repayments as part of your business expenditure. Since your business expenses are not part of the total taxable amount, this deduction reduces your overall tax liability.
Additional Read – Tax Benefits on Business Loan
Tax exemption with Udyog Aadhar registrations
By registering at Udyog Aadhar, you can enjoy a slew of benefits, some of which include easier access to loans and subsidised business loan interest rates. Plus, you can also enjoy exemption on indirect and excise taxes. Registering as an MSME can also help you take advantage of the discounted interest rates and tax rebates. So, if you own a small or medium-sized enterprise, there are many good reasons for you to register under Udyog Aadhar or as an MSME.
Tax deductions on business expenses
Business expenses usually work in your favour, as you can deduct them from the total business revenue to arrive at the total taxable income. Put simply, these business expenses can be subtracted from your total business revenues for the year before computing your tax liabilities.
Here are some of the business expenses you can deduct from the overall revenue:
- Employee wages
- Office supplies such as stationery
- The rental cost of the office premises
- Insurance expenses
- Marketing and advertising expenses
- Any bonuses paid to the employees
Here are some key taxation pointers to keep in mind
- You can also enjoy tax benefits if you’ve taken a personal loan for business expenses
- Your tax liability is calculated by subtracting your total business expenses from your total business revenue
- The principal component of the loan isn’t a business expense and is hence, not tax-deductible
Additional Read – A Guide to Refinancing a Small Business Loan
As a business owner, you need to be aware of these business loan tax benefits and other tax deductions you can avail of to optimise your revenue and profits.
Now that you’re aware of all the benefits available to you, you are ready to take a loan and expand your venture. And Tata Capital is here to provide you with the necessary funding.
With affordable interest rates, fast processing, and flexible repayment, our loans leave little to be desired. Use our business loan EMI calculator to plan your business growth today!