Tax planning tips for startups

Starting a business seems to be quite interesting but running it properly and hassle free really requires a lot of hard work, dedication and patience. To remain hassle free and for healthy business; every business owners should follow the correct compliances like Service tax, TDS, Return Filling, ROC etc.Tax planning tips for startups Any individual or company who is doing business (not having salary income) need to pay income tax in advance couple of time during the year else they need to pay interest for delay in paying taxes. Also, short term accountancy and tax compliance can often lead to long term conflict of financial objectives of a business or an individual. So, proper Tax planning is one of the most important steps to develop a business and run it smoothly The following points should be kept in mind from tax planning perspective:- Analyze your Business Structure: The first and foremost thing which startups first decide is the structure of an organization and its form. The type of form of organization which entrepreneur would like to choose depends on the type of risk he is ready to bear. One should carefully while considering whether he should like to run his business as a private limited company or sole-proprietorship, or partnership. For Example: If an organization is having Gross Total Income of about Rs. 200000, then it is better to function as a sole proprietorship and enjoy the tax slab benefit. Tax Compliance: Every startup needs to determine what the tax compliance that they need to do is. Controlling tax due dates is one of the important task which is required to be followed by every startups in order to avoid penal provisions. Bookkeeping:  For every startup, money which comes in is treated as income and money going out from the business is an expense. In other words, cash method is followed where income and expenses are tallied and the difference arising is considered either as profit or loss to the business. Income Tax Return Compliances: – Filing of Income Tax return is the most authentic proof of the income earned wherein all are required to file their tax returns within the due date showing all the income earned by them.  But, many of us do not file tax returns, the reason of which is very simple i.e. “Unawareness of the fact”. In this regard too, a proper tax consultant should be appointed who will help the startups in availing the benefits of filing tax return in time. Some of the benefits are as under:

  • Filing timely returns saves one from the assessments of Income by the income tax officials.
  • A business having losses can carry forward their losses and get it set-off with future profits.
  • For making an investment, filing of income tax return on time is essential.
  • Tax Refunds can be claimed only when income tax return is filed.

Documentation: Proper maintenance of working files and documents is called documentation. Documentation is one of the main steps towards proper tax planning. Maintaining tax records, such as income statements, balance sheets and purchase receipts, helps in preparing the tax returns as well as it also helps in developing the business and managing it properly. Also, in case any intimation or notice is received from the department, then proper documentation of files helps a lot to get out of the problem. Use Reliable Accounting Software: Doing all works manually creates lot of confusion and irritation, resulting into wrong financial reporting. So, to ensure that minimal time is spent on bookkeeping and fewest possible mistakes occur the startups needs to invest in capable accounting and tax preparation tools and learn to use them effectively. For accounting, quick books, Tally Erp, etc. are recommended as this software is very handy and easy to use. Hiring a Professional: A small business can run smoothly and hassle free, if a knowledgeable professional is behind the success of them. It’s the responsible of the small business owners to hire a professional for proper compliances and tax planning. Tax professionals provide advice and guidance regarding deductions and credits as they are carry knowledge about the tax laws and codes that could affect the business. Tax professionals, such as accountants and Chartered Accountant, can assist them throughout the year with proper tax planning. Paying Taxes Quarterly: There are various taxes which are required to be paid on a quarter basis to the government. Prior, to the payment of such taxes, proper computation are required to be done by an experts or by professionals. Payment of such taxes is required, if the appropriate conditions are applied on the startups which in turn depends on the type of the form of organization selected by them. For example: Provision of service tax gets applied if the total gross turnover exceeds Rs. 10lacs.  Advance Tax Compliances: Another measure which is introduced by the Government is the concept of Advance Tax which is applicable only if the total tax liability of an organization exceeds Rs. 10000. Everyone does not have to pay advance tax. So, the applicability of such provisions is required to be understood by every startup as they are unaware of such facts. For, this, every entrepreneur is required to hire a professional. Tax Deducted at Source: – TDS or Tax Deducted at Source is one of the modes of collecting Income-tax from the assessee in India and paying the same to the Government. TAN is mandatory to be applied for proper collection and deduction of taxes. Most of the startups do not know even when and why to follow such compliances. They are totally unaware about the various sections of TDS in which taxes are deducted. So, a proper guidance is required, which will assist them in running their business smoothly. Thanks for reading for this article. Please feel free to write to us, We want to hear it all!Suggestions? Complaints? Feedback? Requests?  at [] or call us at +91 88208208 11. We would be more than happy to assist you.