Planning well for taxes is a crucial part of making any business sustainable. Efficient tax planning decides the success of your financial planning, saves money and helps you as a business owner to take advantage of every tax benefit available under the laws and regulations.

You must make certain necessary decisions to save taxes and help your business proliferate and sustain well in today’s competitive business environment. Here are a few things to keep in mind if you are a small business owner aiming for a successful and sustainable business while saving as much tax as you can.

Select a tax-saving business model

There are several types of business models you can opt for. Examples are partnership firms, limited liability partnerships and companies. Choosing the right business model would entail determining what benefits or drawbacks each mode of business brings.  

For instance, limited liability partnerships do not have to pay dividend distribution tax (DDT), while companies are liable to pay 16.609% of DDT. In a sole proprietorship, the business owner can declare his or her business on the personal IT form itself. So, you can choose the structure of business which suits your tax-saving needs from a variety of options.

Claim tax deductions

It is easy for small business owners to save more money by claiming all available tax deductions. Certain qualifying criteria ensure that you and your business are eligible for tax deductions. Being aware of the existence of tax deduction provisions is essential for you to take advantage of them. Examples of such deductions are:

  • Preliminary expenses deduction: Claimable under section 35D of the Income Tax Act, 1961, this deduction pertains to capital expenditures made while a business is set up.
  • Home office deduction: Offered under section 54F of the Income Tax Act, you are eligible for this deduction if you intend to double-up your residence as your office.
  • Business expenses: You can claim this deduction against revenues generated for expenses incurred during the ordinary course of business.
  • Charitable donations: Under section 80G of the Income Tax Act, sums of money donated for charity by the company is deductible from your tax amount.

Hire a taxation professional

Tax laws in India are often complicated and difficult to decipher. To avoid penalties, fines and unnecessary loss of money, hiring a professional for your tax calculation purposes is necessary for small businesses.

A qualified tax professional would guide you on the various sections of the Income Tax Act and help you in making the right investments.

The final word

Along with financial and tax planning, a small business requires multiple measures to be put in place to stay afloat. Steps taken for the viability of a business can be multifaceted.

In cases of financial crisis, small businesses may also be required to opt for a business loan. However, NBFCs such as Bajaj Finserv offers easy flexi business loan facilities which can smoothly mitigate financial difficulties faced by small business owners.

Tax planning and financial health of a business are interlinked. Considering the tips above and avoiding risky financial situations would ensure the viability of a small business enterprise.