Tax season is upon us. With the slow economy and coronavirus scare, it is best to know how to save taxes for your small business. Good news, you can save taxes if you collect payments online!
The Government of India just announced new tax initiatives for small businesses. A rule passed yesterday, stated that any business that has a turnover of Rs. 2 crores or less can save up to 2% in taxes if they transacted online.
Earlier the presumed profit was deemed at 8% of the total turnover. It has now been revised to 6% and only those businesses that deal online, qualify for the rebate.
“It has been decided to reduce the existing rate of deemed profit of 8 per cent under section 44AD of the (Income Tax) Act to 6 per cent in respect of the amount of total turnover or gross receipts received through banking channel/digital means for the financial year 2016-17.”
Let’s break this down for you.
– If your annual turnover is 2 crores and your entire transaction is cash-based, you’ll be taxed at 8% which pegs your profit at Rs.16 lakhs. After deductions, you will be liable to pay Rs.2.67 lakhs in taxes.
– If only 40% of your transactions are cash-based, only that percentage will be taxed at 8%, while the rest will be taxed at 6%. You will save Rs.74,160 in taxes.
– If you are 100% digital, you will end up saving Rs.1,23,600 in taxes!
– If your annual turnover is below Rs.66 lakhs, you not only qualify for deductions but your tax liability becomes zero!
This is, perhaps, the easiest (and legal) way to save on taxes. Easier than hiding your money in offshore accounts or under your mattress!
Benefits of Digital Payments for Small business Taxes:
1. Demonetization Will Just be Another Move
So, when the government drops a bomb like demonetization, it won’t feel like a nuclear disaster. Transacting online reduces your dependency on cash considerably and gives more authenticity to your business as everything is on the record.
2. Forget Paper Woes
Keeping track of your payments, transactions, sales is easier when it’s not on paper. Pull up any transaction, dating any period, from your online database and forget about maintaining files and looking for them when you need something.
This is how Mumbai MUN went digital to avoid all the paperwork!
3. Faster and Safer Transactions
Online transactions are much faster and safer. You won’t have to wait around for your customer to get you cash, for which he would have to spend days at the long queues in front of the ATM.
Check out how Adister juggles payments with ease!
You can collect payments on the go with Instamojo. Just sign up with a few details and you can start operating in 2 minutes. With Instamojo, you can:
– Collect payments with just a link
– Share the payment link over SMS, Emails, Whatsapp or other social media.
– Track your payouts
– Create and save invoices
– Issue refunds and much more.
Several SMEs have gone digital with Instamojo. Have you? #GoCashless, Save more!