Taxation is one of the most integral parts of any business. But paying tax does not always go hand in hand with your finance. For a small business, tax amounts can always be a little scary as you are paying it out of your business income! And let us be honest, no one likes to pay excess so we always try to save or escape it. However, before we go into how you can legally reduce your tax we would like you to take a note that tax evasion is a crime and attracts high penalties! So it is always the best option to stay within the legal limits and pay your taxes on time!
Let us now move ahead and look at how to legally reduce the tax:
- Principal place of business:
Many small entrepreneurs use their home as a principal place of business. This helps in reduction of operational costs. This in turn helps you to claim deduction in expenses like property tax, utility bills, etc. This can be claimed under section 32 and section 37 of the Income Tax Act (IT Act)
- Additional Depreciation:
The IT Act allows you to claim a further depreciation of 20% on any new machinery that you install within that financial year. This can be observed under section 35AD; however, this can be claimed only in the first year of the operations of the new machine
- Preliminary expenses:
Most commonly known as start-up expenses, you can write these costs off under the provisions of section 35D. These costs can include market surveys etc. This deduction is done in 5 equal installments over the first five years
- Avoid penalties:
Taxation comes with deadlines. Being a responsible entrepreneur is very essential to avoid penalties. If you do not follow these deadlines or are unaware about them, you may have to pay heavy penalties or fines which will increase the burden on your capital investment
- Expert Advice:
Accountants and Attorneys specializing in tax field are sometimes the most critical people as they are able to steer you clear out of the nuances of taxation. If you are unclear about even a small thing in taxation, it is always clever to ask an expert!
It is crucial to pay your taxes and we do understand that it can become very confusing at times looking at all the recent tax changes that are taking place. At Boston we specialize in providing you with an updated action plan to make this process a little less ‘taxing’ for you! Get in touch to know more!
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