Even if salaried people are complaining about income tax taking away from their salaries in the last months of the fiscal year 2023–24 due to the last-minute tax savings rush, conditions are not any simpler for enterprises.
Both paid employees and business owners must deal with the hard realities of income tax. In addition to the well-known tax-saving strategies like gifts and home loan installments, entrepreneurs can also avoid income tax by utilizing some lesser-known strategies.
Tax-Saving Advice for Business Owners
1. Remember to Pay your Business's Utility Bills
When utilizing their cars and phones for work-related activities, entrepreneurs can deduct business or utility expenses. For example, costs for cars, tolls, phones, parking, driver's fees, etc., may be claimed as business utility expenses if they are used for a legitimate business purpose. Moreover, extra expenses, such as electricity bills, might be recovered if one works from home.
These could reduce the tax expenses faced by entrepreneurs and startups. Preliminary, regular, convenience, and depreciation expenditures are a few company utility expenses that can be written off to reduce tax liabilities.
2. Recoup Accommodation and Transport Expenses
Due to many business-related responsibilities, entrepreneurs must migrate often. And if you are a business owner, then nobody knows it better than you. As a result, you might want to consider not charging expenses associated with travel or housing with your account. Instead, file it under the business's account.
3. Earnings from Hiring Relatives
Paying family members a remuneration comparable to that of regular employees and hiring them to help with startup costs is one of the simplest ways for business owners to lower their tax burdens. In the event that the family member has no other income, the company may pay them up to ₹2.5 lakh annually (based on the current tax bracket), in which case the relative is exempt from paying taxes.
This not only aids in business growth but also provides the entrepreneur with the advantage of having trustworthy individuals around. Since this is a business expense, the total amount spent can be decreased by deducting it from taxable income.
4. Consider using the Extra Money for Marketing
As we go into the Digital Era, everything is turning digital. As a result, you can stop using conventional marketing strategies and shift your products and services online. It will benefit you in two ways. First off, engaging with novel internet marketing techniques can greatly increase your clientele and business growth. Secondly, all costs associated with marketing are tax deductible. Consequently, you can save money on this as well. As a result, if you use the additional cash you have at the end of the year to promote and advertise your firm, you can save taxes.
5. Examine the Advantages of Depreciating Machinery
Business owners that run manufacturing companies can benefit from increased depreciation and section 35AD-designated business status, among other benefits provided by the Income-tax Act. In addition to the standard depreciation, units that are installed with new machinery or equipment in a manufacturing company during the year are eligible for an additional depreciation of up to 20% in the year that the machinery or equipment is placed into service.
Comparably, a new part known as section 35AD was established, enabling companies involved in the designated businesses to write off 100% of their capital expenses. Section 35AD advantages were designed to encourage private sector investment in public infrastructure, such as cold storage facilities, hospitals, and roadways.
