It’s the season to get your finances in order, but given how the economy is doing, are you scared about paying a lot of tax to the Government? Here are some tax-saving tips for small businesses in 2021.
Tax laws are complex, but with a little effort, you can save a lot more in taxes than you may have imagined. These tax-saving tips and deductions can help you reduce tax liability when filing your Income Tax returns.
The government announced May 20, 2021 that it was delaying the ITR filing deadline for most individuals for the financial year 2020-2021 from the customary July 31 to September 30, 2021. Form 16 submissions from employers was due on July 15, 2021, instead of June 15 as before.
These were dates that were in the year of 2021, but the dates have revised this year, 2022. Here is the dates, 7th december 2022, individual should deposit deadline for November 2022 tax deductions and collections.
The central government must receive all money deducted or collected by government offices on the same day as tax payments are made, regardless of whether an income-tax challan exists. November 2022 is the due date for challan-cum-statement submissions for taxes that were deducted under section 194-IB. However, the most precise date for the ITR is December 30, 2022.
Tax saving tips for small businesses:
Investments
In Section 80C, taxpayers are able to lower their taxable income by using tax-saving assets or qualifying expenses as a way to lower their taxable income. It permits an annual deduction from the taxpayer’s gross income of up to Rs 1.5 lakh. Both individuals and HUFs are eligible to use this deduction’s benefits. The benefit of this deduction cannot be used by corporations, partnership firms, or LLPs. These tax-saving instruments include:
- Public Provident Fund
- National Savings Certificate
- Sukanya Samriddhi Scheme
- Employee Pension Fund
- Equity Linked Savings Scheme
- Repayment of Principal amount on the home loan
- Bank deposits specified under Section 80C
Health
Expenses towards life and healthcare are inevitable. With benefits spread under various heads, one can claim deductions for insurance and healthcare. These include:
- Life insurance premium up to Rs 1.5 lakh (Section 80C)
- Health insurance premium and preventive healthcare for a family up to Rs 60,000 (Section 80D)
- Medical expenses for a disabled person (self) up to Rs 1.25 lakh (Section 80U)
- Medical expenses for a disabled person (dependent) up to Rs 1.25 lakh (Section 80DD)
- Treatment of high-risk diseases (as specified) is allowed as a deduction on actuals (Section 80DDB)
Home
If you are a homeowner, you might already be saddled with long-term expenses. Use the following deductions to offset some tax liability:
- Repayment of principal on a home loan up to Rs 1.5 lakh (Section 80C)
- Deduction of interest paid towards home loan up to Rs 2 lakh (Section 24)
- For first-time home buyers, benefit on the interest of Rs 50,000 (Section 80EE)
Education
The tax department provides some relief against the rising cost of education. Whether for yourself or a dependent, see if you can claim benefits for the following:
- Tuition for children’s education up to Rs 1.5 lakh (maximum of 2 children) (Section 80C)
- Deduction on the interest of educational loan (on actuals) (Section 80E)
- Any amount received as a scholarship.
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Expenses – salaried professionals
As an employed professional, your organization may be including certain benefits in your package as a cost to the company. Revisit your offer letter to check for value-added benefits or speak to the concerned HR person.
Regardless, you can claim certain expenses as deductions from your taxable income:
- House Rent Allowance (HRA) based on a calculation across four parameters (Section 10{13A})
- Expenses under Leave Travel Allowance (LTA) for you and your dependents for travel within India (subject to certain conditions) (Section 10{5})
- Expenses up to Rs 19,200 per year for local travel (Section 10{14}{ii})
- Reimbursements on telephone and internet expenses to the tune of Rs 2000 (Section 3{7}{ix})
- Meal coupons up to the value of Rs 2600 per month (Section 17{2}{vii})
Expenses – business
A businessperson can claim work-related expenses as a part of the business expenditure and claim deductions on taxable income.
- All expenses on travel and stay for the purpose of business
- Entertaining clients, vendors, etc. over meals
Charity and donations
Contributing to the wellbeing of the underprivileged and the welfare of the state also has its advantages with the following deductions:
- Contributions to a registered charitable institution up to Rs 2000 (Section 80G)
- 100% donation to a scientific research or rural development unit (Section 80GGA)
- Donations to political parties, subject to certain conditions (Section 80GGC)
Other Tax exemption avenues
Certain sources of income or gains are exempt from tax, such as:
- Gifts, cash, etc. received on your marriage
- If you are a farmer, any income arising out of agricultural land or produce
- Any inheritance through a will
- Equity or mutual fund gains beyond a holding period of one year
- Dividend received from equity or mutual fund investments
This list is not exhaustive, and we suggest you speak to a tax professional who will be able to advise you in greater detail. Need to talk to a tax expert? Get on a call with an expert CA of ClearTax – Instamojo’s taxation partner.
If you are new to figuring out taxes for your businesses, we have curated courses on mojoVersity, just for you. Register for a FREE course on understanding how Goods and Services Tax (GST) applies to your business.
1 comment
Tax saving for a businessman is very important paying tax on right time is good for a country best article on Tax saving ideas