Tax Saving Tips Every Business Owner Must Know

Tax-Saving Tips Every Business Owner Must Know

Tax laws may seem complex, but with a little effort, you can save a lot more in taxes than you may have imagined. Here are a few tax saving tips and deductions you can claim to reduce tax liability when filing your Income Tax returns.

Income tax returns are direct taxes that you as an individual must file. The last date for filing income tax returns for the AY 2017-18 is August 31, 2018.

Investments

Devised for tax-saving instruments, Section 80C is the most common head under which an individual can save up to Rs 1.5 lakh every year. These tax-saving instruments include:

  • Public Provident Fund
  • National Savings Certificate
  • Sukanya Samriddhi Scheme
  • Employee Pension Fund
  • Equity Linked Savings Scheme
  • Repayment of principal amount on home loan
  • Bank deposits specified under Section 80C

Health

Expenses towards life and healthcare are inevitable. With benefits spread under various heads, one can claim deductions for insurance and healthcare. These include:

  • Life insurance premium up to Rs 1.5 lakh (Section 80C)
  • Health insurance premium and preventive healthcare for a family up to Rs 60,000 (Section 80D)
  • Medical expenses for a disabled person (self) up to Rs 1.25 lakh (Section 80U)
  • Medical expenses for a disabled person (dependent) up to Rs 1.25 lakh (Section 80DD)
  • Treatment of high-risk diseases (as specified) are allowed as deduction on actuals (Section 80DDB)

Home

If you are a home owner, you might already be saddled with long-term expenses. Use the following deductions to offset some tax liability:

  • Repayment of principal on home loan up to Rs 1.5 lakh (Section 80C)
  • Deduction of interest payment towards home loan up to Rs 2 lakh (Section 24)
  • For first-time home buyers, benefit on interest of Rs 50,000 (Section 80EE)

Education

The tax department provides some relief against the rising cost of education. Whether for yourself or a dependent, see if you can claim benefits for the following:

  • Tuition for children’s education up to Rs 1.5 lakh (maximum of 2 children) (Section 80C)
  • Deduction on interest of educational loan (on actuals) (Section 80E)
  • Any amount received as scholarship.

Expenses – salaried professionals

As an employed professional, your organisation may be including certain benefits in your package as a cost to company. Revisit your offer letter to check for value-added benefits or speak to the concerned HR person.

Regardless, you can claim certain expenses as deductions from your taxable income:

  • House Rent Allowance (HRA) based on a calculation across four parameters (Section 10{13A})
  • Expenses under Leave Travel Allowance (LTA) for you and your dependents for travel within India (subject to certain conditions) (Section 10{5})
  • Expenses up to Rs 19,200 per year for local travel (Section 10{14}{ii})
  • Reimbursements on telephone and internet expenses to the tune of Rs 2000 (Section 3{7}{ix})
  • Meal coupons up to the value of Rs 2600 per month (Section 17{2}{vii})

Expenses – business

A businessperson can claim work-related expenses as a part of the business expenditure and claim deductions on taxable income.

  • All expenses on travel and stay for the purpose of business
  • Entertaining clients, vendors, etc. over meals

Charity and donations

Contributing to the wellbeing of the underprivileged and the welfare of the state also has its advantages with the following deductions:

  • Contributions to a registered charitable institution up to Rs 2000 (Section 80G)
  • 100% donation to a scientific research or rural development unit (Section 80GGA)
  • Donations to political parties, subject to certain conditions (Section 80GGC)

Other tax exemption avenues

Certain sources of income or gains are exempt from tax, such as:

  • Gifts, cash, etc. received on your marriage
  • If you are a farmer, any income arising out of agricultural land or produce
  • Any inheritance through a will
  • Equity or mutual fund gains beyond a holding period of one year
  • Dividend received from equity or mutual fund investments

This list is not exhaustive, and we suggest you speak to a tax professional who will be able to advise you in greater detail. Need to talk to a tax expert? Get on a call with an expert CA of ClearTax – Instamojo’s taxation partner.

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