Sometimes tax payments are too large to make. You might have wished there was some way to save a little tax. If yes, go ahead and read this article to know some legal methods to save on your taxes.
Businesses aim to gain skyrocketing sales and profits. And why not? Profits serve as the ladder to the growth of a business. here is How to Save Tax in India for a Private Limited Company
And after all your efforts, if you achieve good profits, there comes the 30% tax you need to pay to the Government.
Paying tax is our legal duty. We cannot and must not avoid paying taxes. But there are certain tax planning methods you can utilise during the financial year to save a portion of the tax payable.
You might question ‘is tax saving legal’? Tax evasion is illegal, but tax saving is completely legal.
For your brand-new, unregistered business, you can select from a selection of company name search in the Vakilsearch company name generator.
Salary to the Founders or Directors
- Directors of a company take away their share of the profits in a predetermined ratio
- For the purpose of saving tax, the profits can be transferred to the director as salary, rather than a dividend
- The salary to founders or directors is an allowable expense to a private limited company.
Sitting Fees to Directors
- Companies can pay sitting fees to the directors for attending board meetings or committees
- Such payment should not exceed one lakh rupees per meeting
- It can be claimed as an expenditure in the hands of the company and is exempt in the hands of an individual
- In other words, companies can transfer profits to the directors in the form of sitting fees.
- A lot of expenses are borne by the founders of the directors while setting up the company
- For example, Professional fees for incorporation of the company, fee for drafting MoA, and AoA, training of employees, fees paid to ROC, etc.
- You can take advantage of all these expenses in saving tax for your company by recording these in the books of accounts.
Pay Advance Tax
- Otherwise known as the pay-as-you-earn scheme, advance tax is a tax you estimate your turnover and pay in advance
- Paying advance tax on time ensures you don’t attract the late payment interest on taxes paid at the end of the financial year.
Director’s Vehicle Expenses
- The vehicles that are used by the director(s) for business purposes, say, attending meetings, and for business traveling bear expenses
- Not only the fuel costs but even the cost of maintenance and repair of the vehicle also can be claimed for. For this, you would require proper documentation.
- If the registered office of your company is in the name of any director, or a relative, then you can book this expense and avail tax benefits.
Capitalising on Capital Asset and Depreciation
- If an asset helps you in your business and gains revenue, you must capitalise on it.
- It will then reflect in your balance sheet, and not in your profit and loss statement.
- Fixed assets shown in your balance sheet must be depreciated for their useful life. So we can grab the tax benefits.
Salary to a Family Member
- Family members provide assistance and guidance in businesses free of cost
- You can record their salaries in the books of accounts. And so save on taxes by bringing your profit portion back home with dual tax benefits.
- After any big success or approx after every quarter, the business throws a dinner or an in-house party for family members or partners
- Do not forget to book these expenses and save tax.
- As a director of the company, you need to socialise a lot to make sure your company reaches heights
- Such social events can be booked to save tax.
When these methods are legal, why not save on some taxes? Reach out to the experts at Vakilsearch to understand more about how to do all this legally and efficiently.