Business owners must pay income tax on the profits made from their enterprise, this can be a substantial amount, and they are always looking for credits and deductions to reduce their tax liability. One of the most difficult concepts to grasp is the income tax. Fortunately, there are several tax-saving measures available to help you reduce the taxation liability as a small businessman. Consider any of the strategies mentioned below if you need to minimize your taxable income this year.
1. Hire a Family Member as Tax Consultant –
Employing a family member is one of the easiest ways to minimize taxes on your small business. The government provides a number of options, all of which have the possible advantage of shielding profits from taxation.
2. Right Investments in Marketing –
If a company is still using traditional marketing methods, it is time to switch to digital marketing because it allows you to venture out to several prospective clients, and the likelihood of acquiring new customers. This will also help an enterprise save money on taxes because marketing costs are tax-deductible.
3. Reimburse Accounts –
Consider using a government-compliant package to compensate workers for lodging, performance, equipment, or other expenses, this is known as an accountable plan. In this scheme, the employer deducts costs but does not disclose reimbursements to workers as wages, thereby saving the company payroll taxes and lowering total taxable income.
Furthermore, if the business does not already provide an effective plan for workplace reimbursement, your employees will most likely request one in the near future. Employees cannot subtract compensation claims employee costs under the new tax law. Giving your workers an accountable reimbursement package will help them save money on taxes while still benefiting the company.
4. Tax-Free Strategies –
Paycheck, incentives, and allocations of your portion of the company's earnings are all taxable. However, there are opportunities to profit from the company's performance without having to pay the tax. Health care, insurance plans, and retirement plans are all tax-free advantages. Debts made by the company at low interest, the company will be required to disclose interest from this arrangement.
5. Cash Transactions –
Stop making cash transactions to a single individual in excess of Rs 20,000/- in a single day. The Income Tax Assessment act prohibits the deduction of expenses if charged to an individual in a single day in excess of Rs 20,000/- other than by cheque or draft. For example, if you are performing renovations at your factories and pay more than Rs 20,000/- in cash to a single individual on a single day, income tax officers have the authority to disallow such expenditure when calculating total income.
As a small business owner, you can avoid taxable taxes by planning ahead of time to keep some of your money working for you. When it comes to how to save tax, you can reduce the amount of taxes you pay by taking advantage of available breaks and opportunities. It is your responsibility to find new ways to reduce taxes for your small business. The decisions you make now have the potential to save you a lot of money this year and in the future.