Top 10 Tax Saving Tips for Entrepreneurs
Updated On Jan 28, 2021
Doing business is neither easy nor cheap. Where every single penny earned is of much worth, losing it is hard to digest. Did you know that 90% of entrepreneurs end up paying higher taxes than they actually owe? Why does this happen? It is because they lack knowledge as well as expertise.
If you are an entrepreneur looking forward to managing your tax strategy, make sure you do so the right way. Saving tax may be one of your important concerns, so here are a few tips that might help you benefit.
Top 10 Tax Saving Tips for Entrepreneurs
Below mentioned are the top 10 tax tips that entrepreneurs should make the most of to gain tax saving benefit:
1. Hire Your Family Members & Relatives
You can hire your family members and pay them the salary like other employees to save taxes. Since the salaries paid to the employees comes across as a cost to the company, it will be set off against your company’s taxable income, which will thereby help you in reducing the overall tax outgo of the company.
2. Travelling and Accommodation
Quite often, entrepreneurs travel to different places for business purposes, especially more when there are multiple branches across multiple cities. If you want to save taxes, make sure you book your travel tickets as well as accommodation at the company’s expense and not your personal account the next time you travel. This will count as a business expense and deducted from the taxable income of your firm.
3. Invest More in Marketing
Enter the field of digital marketing to get your company and its services highlighted. Why? Simply because it will benefit you from the tax point of view as marketing expenses are eligible for tax deductions.
4. Business Utilities
As an entrepreneur, you can show expenses on phones, parking charges, vehicles, driver’s salary, and more as your utility expenses as these are claimable. This move will help you in saving tax in a significant manner.
5. Medical Insurance
You must be aware of the fact that premiums up to Rs. 25,000 paid for medical insurance are claimable for tax deductions under Section 80D of the Income Tax Act, 1961. If willing, you can cover your spouse, children, and parents under the same.
6. Correctly Deduct Tax at Source
Entrepreneurs while purchasing a service or product can deduct the tax at source when making payments to the seller. There are particular clauses under the Income Tax Act under which if an entrepreneur does not follow the same, then those expenses are not admissible and lead to the additional tax burden.
Donations can help you save tax in a significant manner. To ensure the same, you can donate to registered charities and funds as well as to a recognised political party to claim tax breaks.
8. Housing Loan
Buying a house on a bank loan is highly beneficial in saving tax. If you have purchased your home on a bank loan, rest assured it will help you gain tax benefits. You will be able to claim tax deductions of up to Rs. 1,50,000 on a yearly basis under Section 80C of the Income Tax Act, in case you have linked your PAN with the company.
If you belong to the manufacturing sector, you are eligible for additional tax benefits. Companies (under Section 35AD) who have new equipment and machinery installed over a year are eligible to claim up to 20% additional depreciation, along with the regular depreciation in the year they were brought into use.
10. Digital Transactions
If you are paying Rs. 20,000 in a single go to an individual in cash, it will impact your income tax books. So, consider switching to digital transactions.
Now that you are aware of the tips to work on to save taxes, go ahead and start implementing the possible ideas right away! Rest assured, you will benefit a lot.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.