For a small business owner, paying taxes can be tedious. The last thing you need to do is give the government more of your hard-earned money so you can run your business without significant problems. Fortunately, there are a number of tax saving options that can help your small business lower its tax liability. Consider the following 3 tips if you want to achieve tax depreciation in your small business.
Tip – 1: Limit the Budget of Cash Payment
Most of the time, cash payments seem to be extremely satisfactory. However, small businesses must exercise caution. Tax deductions for such expenses may be disallowed if a single person receives cash payments in excess of 20,000 rupees in a single day.
If you have to pay more than the required amount, it is advisable to use the bank route for a particular payment rather than paying cash. Paying by cheques will also bring benefits to you. Small businesses that employ unorganised labour must keep accurate records of all cash payments. If you do not, you may have to pay more taxes.
Tip – 2: Utilize Your Home as Your Office
Most entrepreneurs work from home to save money on overhead. If you operate your business primarily from your home, you can reduce your tax liability by deducting certain expenses such as depreciation, electricity costs, property taxes, and mortgage payments. Proving that you don’t have an office can help you claim tax relief.
Tip – 3: Worth Your Stocks Beforehand
Normal stock valuation is based on cost, but for stocks with a limited shelf life, the lower of cost or net present value should be used. Net present value indicates the actual realisable value of the stock, prevents overvaluation, and ultimately reduces taxes. To avoid the unwelcome attention of income tax auditors, this valuation method should be consistent over the years. It will help you to deduce your taxes.
Final Overview
These 3 key tips can be followed to reduce taxes in small trades. You should thoroughly comprehend the tax-saving strategies that companies can use to reduce their tax liabilities. Small businesses can benefit from even modest cost reductions in the long run. The government is focused on simplifying tax procedures for both individuals and businesses which is going to be beneficial for both ends.