TAX SAVING TIPS FOR SOLE PROPRIETORSHIP

 

A sole trader ship, also known as Sole proprietorship, is defined as the type of business owned and operated by a single person. The owner and the business entity have no legal distinction.

Personal responsibility for sole proprietors is unlimited. Between the owner and the business, there is no legal separation. This means that business creditors and persons with other rights against the owner can seize both the business and personal assets of the owner.

Tax Benefits: The simplicity of a sole proprietorship is one of its benefits. You do not file a separate tax return for your business; instead, you record all of your business profits and losses on your tax return. However, the personal obligation for judicial judgments, taxes, and debts comes with that simplicity.

Various Tax-Saving Tips:

1) KEEP ACCURATE BOOKS OF ACCOUNTS-

Nowadays, bookkeeping is a major difficulty for small and medium-sized business owners. In a sole proprietorship, the owner is responsible for all aspects of the firm, including sales, marketing, and administration. As a result, the proprietor does not have enough time to keep the firm’s books up to date. To save money on taxes or plan for your Proprietorship firm, you must first grasp taxable business income. Once you’ve calculated your estimated annual taxable income, you can use the tips below to save money on income tax in India.

2) FAMILY MEMBER’S SALARY-

A sole proprietorship is run and managed by a single individual. Most of the time, such business family members of the owner participate in company activities. Family members may assist in the business on a part-time or full-time basis. However, they do not take a salary from the corporation for labour. In basic terms, a family member is assisting in the business as an employee of the firm, and he requires a salary in return. One of the most effective tax-saving strategies is to pay a family member a salary for labour completed. It also aids in the saving of tax benefits for family members.

3) DEPRECIATION OF CLAIM-

One type of spending is capital expenditure, while the other is revenue expenditure. Capital expenditures are costs associated with purchasing fixed assets such as laptops, servers, and machines. This cost is recorded in the asset site balance sheet. Even though there is an instantaneous cash outflow, it is not deducted from the Taxable Net Profit. The Income Tax Act has a clause that allows proprietors to claim depreciation on fixed assets. By filing income tax, the proprietor can minimize his or her taxable income and save money on taxes.

4) BAD DEBTS CLAIM-

Debt collection is a challenge for proprietors, just like it is for other businesses. It’s a sale for which the buyer has not paid the monies due, and the amount owed has now become a bad debt. Due to purchases where the buyer has not paid the whole amount, the majority of proprietors operate on an accrual basis. As a result, business owners must regularly calculate bad debts and claim them in their income tax returns. By declaring bad debts promptly, small and medium-sized businesses can save money on taxes.

5) EXPENSES FOR TRAVELLING-

In a sole proprietorship business, the owner uses his assets for the benefit of the company. For example, travelling for meetings, delivering goods, and so on. The proprietor travels by automobile or motorcycle. Fuel costs, as well as repair and maintenance costs, may be incurred. Because the expense is for the company, it should be reported in the books, which helps to decrease income tax.

Various Tax-Saving Tips

DFSPL (Digilekha Financial Services Pvt Ltd) is a group of specialists who provide accounting and tax compliance services to a variety of businesses and non-profits. Every organization’s success depends on timely and well-informed decision-making. Quality accounting provides managers with high-quality data that allows them to make timely and well-informed choices. Each organization’s accounting must be developed to meet the needs of the management as well as the legal framework.

Comments

Post a Comment

Popular posts from this blog

What Are the Changes in the New ITR Forms?

Image
Income Tax Return (ITR) is a form in which an individual (taxpayer) is supposed to submit the information about his/her income earned in the particular financial year (1st April to 31st March of next year) and tax applicable to the Income Tax Department of India. It is mandatory that every taxpayer must file his/her ITR on or before the mentioned due date given by the income tax department. A taxpayer is eligible to fil ITR forms depending upon the sources, type of income earned, and the category he/she belongs to such as individual, company, Hindu Undivided Families (HUFs), Association of Persons (AOP), Body of Individuals (BOI), etc. The Income Tax Department has specified seven types of ITR forms from ITR-1 to ITR-7 and that taxpayers should choose the relevant form to file their return of income. Income of the taxpayer can be of various forms such as income from salary, capital gains, house property, business/profession, and other sources like interest earned from bank deposits...
Read more

LOCKDOWN AND TAXATION

Image
  Coronavirus brought about a standstill to everyone’s life. The number of people affected ranges from an average salaryman to multinational companies. Another significant aspect of the pandemic was the nationwide lockdown to help control the spread of the virus. It meant a complete stop to the operations of companies and businesses, and as these ventures were in their lives, they suffered massive losses. The country provided compensation for the losses of people through various schemes, but in doing so, a large percentage of national savings was used. As lockdown ends, the government has started to increase the tax rates on businesses and companies to make up for the loss. The ventures being taxed are already going through loss, and to avoid hefty taxes,  Accounting and tax services  are required now more than ever. Digilekha Consultancy Pvt. Ltd is a firm that provides  Accounting and Tax Compliance services in Pune . A skilled team is the backbone of success for a...
Read more

New Tax Regime- For Salaried Persons

Image
  In Budget 2020, Nirmala Sitharaman, the finance minister, announced a new tax system with more tax slabs and lower tax rates. The majority of taxpayers have long requested this, but there is a catch: all deductions and exemptions from the previous tax system must be removed. The finance minister added to the confusion by giving taxpayers the option of choosing between the new regime and the existing one, leaving it up to them to make their own decision. Due to the combined factors of all these variables, tax rules have become more complicated rather than simpler. And if you’re wondering how to decide whether to choose the new or the old tax regime, this blog provides the information you need. We look at the new regime carefully, weigh its advantages, and compare it with the current tax structure. So, let’s begin. More tax slabs and a lower tax rate, but no option to lower taxes under the new tax regime. The new tax system differs from the previous one in two ways. One, under the ...
Read more