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Tata Capital > Blog > Loan for Business > Tax Saving Tips for Small Businesses

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Tax Saving Tips for Small Businesses

Tax Saving Tips for Small Businesses

For most small businesses, the Indian Tax System is like a maze – full of complex laws and statutory compliances. But if you wish to save money on business tax, there are definite ways.

Here are some tax-saving tips for small businesses to help you save a considerable sum and reduce the tax burden.

File your taxes on time

First and foremost, be sure to file your taxes on time or you can miss out on crucial tax benefits while in a hurry. You can now use the online GST portal to pay and file your tax returns and ensure compliance.

Moreover, one can even use the portal to rectify or refile the tax on business in case of discrepancies.

Avoid cash payments

Under the Income Tax Act, any payment over Rs. 20,000 in a day is not deductible from your total income if made in cash. Any expenditure incurred in cash is disallowed from the assessment of your total income, which is why you should avoid cash payments. Especially for the municipal taxes, make payments by cheques to keep a record of your payments and claim deduction on tax.

But if you do make cash payments, keep a record of the same. You can use cash receipts with signature or thumb impression towards your total expense and seek business tax deduction accordingly.

Get tax benefits on business loan

If you service a small business loan, you can avail deductions on the interest payments as it is considered a business expenditure. You can deduct the interest amount from your total income to estimate the business tax.

However, the sum paid towards the principal amount of your loan is not tax-deductible.

Additional Read: Tax Benefits on Business Loan

Make use of GST exemptions

If you are a dealer or supplier who deals with taxable supplies under GST, you need to register for a GSTIN or Goods and Services Tax Identification Number to claim input tax credit.

But if you deal with a non-taxable supply as defined by the GST law, you need not register for the GSTIN.

Moreover, there are three types of exemptions –

  • Absolute exemption
  • Conditional exemption
  • Conditional or partial exemption

You can claim business tax exemptions based on the supplies you deal with. Be aware of which supply is within the scope of exemption to secure the tax benefits accordingly.

Additional Read: Tax Benefits of SME Loans in India

Claim additional depreciation

An enterprise can claim up to 20% additional depreciation cut for any new machinery purchased in the fiscal year – especially enterprises which manufacture goods. However, the provision is only applicable in the first year of operations via new machinery.

Now, while these measures can cut down your tax to some extent, you should consult a tax expert to craft a better tax plan.

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