Tax season is upon us. With the slow economy, it is best to know how to save taxes for your small business. Good news, you can save taxes if you collect payments online!
The Government of India just announced new tax initiatives for small businesses. A rule passed years ago had stated that any business that has a turnover of Rs. 2 crores or less can save up to 2% in taxes if they transacted online.
Earlier the presumed profit was deemed at 8% of the total turnover. It has now been revised to 6% and only those businesses that deal online, qualify for the rebate.
The Union Finance Ministry said.
“It has been decided to reduce the existing rate of deemed profit of 8 per cent under section 44AD of the (Income Tax) Act to 6 per cent in respect of the amount of total turnover or gross receipts received through banking channel/digital means for the financial year 2016-17.”
How can your business save taxes:
- If your annual turnover is 2 crores and your entire transaction is cash-based, taxes charge at 8%, which pegs your profit at Rs.16 lakhs. After deductions, you will be liable to pay Rs.2.67 lakhs in taxes.
- If only 40% of your transactions are cash-based, only that percentage will be taxed at 8%, while the rest will be taxed at 6%. You will save Rs.74,160 in taxes.
- If you are 100% digital, you will end up saving Rs.1,23,600 in taxes!
- If your annual turnover is below Rs.66 lakhs, you not only qualify for deductions but your tax liability becomes zero!
This is, perhaps, the easiest (and legal) way to save on taxes. Easier than hiding your money in offshore accounts or under your mattress!
Benefits of Digital Payments for Small business Taxes:
No more papers piling up
Keeping track of your payments, transactions, sales is easier when it’s not on paper. Pull up any transaction, dating any period, from your online database and forget about maintaining files and looking for them when you need something.
This is how Mumbai MUN went digital to avoid all the paperwork!
Faster and Safer Transactions
Online transactions are much faster and safer. You won’t have to wait around for your customer to get you cash, for which he would have to spend days at the long queues in front of the ATM.
Check out how Adister juggles payments with ease!
You can collect payments on the go with Instamojo. Just sign up with a few details and you can start operating in 2 minutes. With Instamojo, you can:
– Collect payments with just a link
– Share the payment link over SMS, Emails, Whatsapp or other social media.
– Track your payouts
– Create and save invoices
– Issue refunds and much more.
Several SMEs have gone digital with Instamojo. Have you? #GoCashless, Save more!
9 comments
Very informative & useful article lots of new things learned keep posting
thank you!
very informative artical lots of new things learned thank you!!!!!!!
Hello,
I found your article very interesting. Thank you for the wonderful article. The content is thorough and easily understandable.
Thank you for the wonderful article. The content is thorough and easily understandable.
Thanks Rapti Gupta for sharing great knowledge with readers.
This is a good read for all small bootstrapped startups which have recently turned profitable. The first worry they come across is taxes. A chunk of their profit is gone in taxes. However, if going cashless will help you save taxes why not go for it from the begining? It is easily implementable and does not required signifiicant efforts.
Thanks Rapti Gupta for this article!
Small organizations surely are going to leverage this opportunity to save taxes. Individuals looking forward to starting their business or Future entrepreneurs without worrying about tax deductions can kickstart their work. Since online transactions are quick and easy, they can benefit from this fast-paced payment mode. At the same time, they can keep a track of their payments. Really a nice step taken by the Indian government and nice elaboration by the author.
You explained it well I must say. When it comes to saving/minimizing costs, Small Business Entrepreneurs (SMEs) need to consider various additional factors, such as saving up to 90% of energy by shifting to Laptops from Desktops, cut down on phone expenses by reducing the number of landlines and opting for full-fledged Internet broadband plans, and so forth.
As a startup can be operated from one’s home or private place, considering reduced cost initially is the best way possible to make it up to the ultimate business goal. A penny saved is a penny earned, after all.
This is the kind of manual that needs to be given and not the random misinformation that is at others blog.
I am so happy to read this.
Thanks for sharing this wonderful article.