5 Ways You Could Save Tax If You Are An Entrepreneur: Check Out How

It is costly to run a business you own. When novice entrepreneurs begin preparing for the launch and maintenance of their enterprises, they are naturally preoccupied with the amount of money they can make rather than the costs that will be incurred to keep the firm functioning.

They frequently think about the expenses of getting started, such as equipment, as well as the cost bases for their major items, such as wholesale prices. However, certain expenditures go unpaid. It's critical to account for these costs at the planning stage, or they'll come as a shock afterwards.

Although, there are other ways in which you can save some amount differently. These come under the Indian Income Tax Act, 1961, needs to be be utilized by you if you are an entrepreneur. It depend on your smartness and how you manage them accordingly.

Ways To Save Tax

Preliminary Expenses

Under section 35D of the Indian Income Tax Act, 1961, costs incurred prior to the start of the business unit are deducted.

It is recorded in the company's books as a preliminary cost and can be deducted from taxable revenue over a five-year period.

Expense on Hotel Booking and Travelling

Due to company-related activities, entrepreneurs must travel from one location to another, and no one understands this more than a business owner.

So, one thing to think about is not deducting travel or lodging charges from your account. Rather, submit it to the business's account.

Business Utility Expenses

Businesses that use their cars and phones for work can deduct these costs as business or utility expenditures.

Example

Vehicle expenditures, phones, parking, driver's fees, and other similar expenses can be claimed as business utility expenses if they are utilised for a genuine business purpose. If you work from home, you can deduct other expenditures like electricity.

Medical Insurance Premium

Entrepreneurs can claim a tax deduction for any medical insurance premium over Rs 25000.
The insurance can be for the entrepreneur's spouse, dependent parents, or dependent children, and is tax deductible under Section 80D of the Indian Income Tax Act, 1961.

Always Deduct Tax at Source

Under the Indian Income Tax Act, 1961, certain transactions require the buyer or service receiver to deduct tax source while making payment to the seller or service provider. If a person fails to do so, an expense becomes inadmissible, resulting in a higher tax bill.

Let's undersatnd this,

Suppose, you pay your business agent Rs 3,00,000 in commission per year and do not deduct tax at 10%. When calculating taxable income, the whole expenditure of Rs 3,00,000 is excluded.