In India, a typical entrepreneur always wants to hide things from the tax department under a feeling of being questioned and asked for paying taxes. In this race for non-disclosure, sometimes the things of our benefit also remain underground.
This process of hiding starts without even knowing "What if this is disclosed?". Many a times this has positive impact as well!! Seems funny?? In our experience, many are seen doing the same.
Tax is not on revenue (sales) but on Profit!! Funny part is people start worrying about taxes with respect to the revenue.
Above is a very broad list of items which are available as business deductions and we can deduce the sales / revenue to this extent before working out the taxes.
Our article on 5 basic disciplines of accounting for businesses would help you with tips of tracking the same diligently.
So, first track and than calculate correct PROFITS. It's quiet possible that you end up at a legitimate and acceptable tax liability without playing any gimmicks :-)
This process of hiding starts without even knowing "What if this is disclosed?". Many a times this has positive impact as well!! Seems funny?? In our experience, many are seen doing the same.
Tax is not on revenue (sales) but on Profit!! Funny part is people start worrying about taxes with respect to the revenue.
- There are expenses which are deductible from this revenue to arrive at the profit. Please understand all the expenses which are incurred to earn the revenue directly and indirectly are allowed to arrive at the taxable profit.
- Not only cash expenses but the expenses which are to be paid on later date are also available. These are termed as accrued expenses in accounting language. This include your year end bills of supplies, rentals, electricity which don't get paid in that period but are pertaining to that period.
- Also, there is are certain virtual deduction like for depreciation of Capital Goods like plant, building, machinery, equipment, motor car purchased in past for the purpose of the business. This is basically value for wear and tear of the assets in that period to generate the sales. Additional deduction on account of depreciation is allowed in the year of such investments for plant and machinery.
- Other virtual deduction that needs to be taken into account while doing the computation of profits is with regard to the Bad Debts. Many times of our customers don't pay after committing even after followup and legal action. Those customer balances could be written off in the books and claimed as deduction. Even the discounts while settlement of dues are available as deduction if part of the deal.
- Whenever there is an actual help coming in from the Partners, Directors, family members or relatives, we can pay them salaries and commissions. Even the directors and partners can have legitimate remunerations which are available as deductions subject to certain conditions.
- You may claim market rentals for the family properties from the company. This is something that many of us may be missing.
- Other areas to check are credit card expenses and cash spending for business directly and indirectly. This many a times doesn't gets reflected in the books and may be missed out. It may be for business development, marketing, conveyance and so on for business purpose.
Above is a very broad list of items which are available as business deductions and we can deduce the sales / revenue to this extent before working out the taxes.
Our article on 5 basic disciplines of accounting for businesses would help you with tips of tracking the same diligently.
So, first track and than calculate correct PROFITS. It's quiet possible that you end up at a legitimate and acceptable tax liability without playing any gimmicks :-)
