Profits and sales should skyrocket for businesses. It makes sense, right? In order for a business to grow, profits must be made. This article explains how a private limited company can save on taxes in India
You will have to pay the government 30% tax if you achieve good profits after all your efforts.
We are legally obligated to pay tax. In order to live a prosperous life, we must pay taxes. During the financial year, you can use certain tax planning methods to reduce your tax bill.
Would it be legal to save taxes? Saving taxes is legal, but evading taxes is illegal.
Tax-Saving Tips
Salary to the Founders or Directors
- Profits are divided among directors in a predetermined ratio
- A director can receive the profits as a salary instead of a dividend to save tax
- A private limited company may deduct the salary of its founders or directors.
Sitting Fees to Directors
- Board meetings or committee meetings can be paid for by companies by paying directors sitting fees
- Each meeting should not cost more than one lakh rupees
- In the hands of a company, the expense can be claimed as an expenditure, while in the hands of an individual, it is exempt
- The directors can receive sitting fees from companies when they transfer profits.
Preliminary Expenses
- In the process of company formation in india, the founders and directors bear a lot of expenses
- Incorporation fees, fees for drafting the Memorandum of Association and Agreement of Assignment, training of employees, fees paid to ROC, etc.
- Your company can save tax by recording all these expenses in the books.
Pay Advance Tax
- Advance tax, also known as pay-as-you-earn tax, is a tax you pay in advance based on your estimated turnover
- In the event of a late payment, you will not be charged interest on the taxes paid at the end of the financial year if you pay advance tax.
Director’s Vehicle Expenses
- Directors are required to pay expenses for the vehicles they use for business purposes, such as attending meetings and traveling for business.
- It is possible to claim both fuel costs and maintenance and repair costs for the vehicle. Documentation is required for this.
6. Rent Expenses
- It is possible to book this expense and claim tax benefits if the company’s registered office is owned by a director or relative of the company.
7. Capitalising on Capital Asset and Depreciation
- In order to gain revenue from an asset, you need to capitalise on it.
- Rather than appearing on your profit and loss statement, it will appear on your balance sheet.
- Your balance sheet must depreciate fixed assets over their useful lives. In order to take advantage of the tax benefits.
8. Salary to a Family Member
- Providing advice and assistance in business is a free service provided by family members
- The books of accounts can be used to record their salaries. Bringing your profit home with dual tax benefits will save you money on taxes.
9. Entertainment Expenses
- Business owners throw in-house or family dinners after any big success or approximately every quarter.
- Make sure these expenses are recorded and you save tax.
10. Meeting Expenses
- You must socialize a lot as a director to ensure your company reaches its full potential
- Tax savings can be achieved by booking such social events.
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