How Tax Planning & Tax Management Help in Saving Tax in Business?


How to save tax in business in India?


Are you a business owner?
Do you often wonder about how to save tax in business in India?

If you are a business owner who thinks about how to save tax in business in India, then this blog is for you!

We realize that income tax is the harsh reality of income. Every single earning person in the country, be it a salaried employee, an entrepreneur or a business owner has to accept paying taxes. Needless to say, it is much needed as well!

If we don’t pay our taxes as citizens of India then how will our economy function? We need to contribute this amount because it is ultimately a source of revenue for the government. Though, if you need to know the best way to save tax in India, then through this article we will try to help you in minimizing your tax liability.

Let us consider the various ways through which one can do income tax saving if they run a business. As we all know, the government has imposed tax liability on self-employed as well as salaried. No matter what the tax rates, everyone wants to save money as much money as they can for their today and tomorrow.

Today we will tell you – how to save tax in business in India! In order to reduce the liability, business houses can prepare financial plans to save taxes through future investments. It is essential to invest their money in the right way for fruitful consequences. In this article, we will discuss what exactly tax planning and tax management are, and how does it help businesses in income tax saving.

Tax Planning – How To Save Tax in Business in India?

While the term “business tax planning” is employed frequently, it’s not very well understood. We will explain everything you need to know about tax planning, why it is essential, and most importantly, how it can help your business in growing.

Tax planning is defined as “activities done to minimize tax liabilities to make sure all available allowances, deductions, exclusions, and exemptions are working together within the most tax-efficient manner to reduce the total tax bill”.

It is one of the first steps you need to take when you think about how to save tax in business in India. Tax planning strategies are typically employed to help a company achieve its financial and business goals.  

The benefits serve the need for both large and small businesses. Let’s look at some income tax benefits after implementing proper tax planning:

  1. Lowering the amount of taxable income
  2. Reducing the tax rate
  3. Getting a better control of when taxes get paid
  4. Maximizing tax relief/tax credits available

The tax law is continuously changing, and so are the allowances. Thus, regular reviews are essential for tax planning in business. There are various types of business tax planning strategies. Here are a few areas where you can do income tax saving:

Capital Gains Tax 

Planning for Capital Gains Tax means taking several things into account, such as what is being sold and to whom. With us, you can plan your CGT after deploying the funds in various Section 54 of IT act exemptions.

Corporate Tax 

Corporate tax is the tax paid by the companies registered under company law in India on the net profit that they makes from conducting their business. Both small and enormous businesses can retain more profit or extract more value from the market from corporate tax planning.

You need to carefully deploy your funds into income tax saving schemes like ELSS mutual funds, etc. We provide such schemes within minimum documentation and hassle-free steps. Apart from that various corporate tax saving strategies include- 

  1. Deferring income or profits
  2. Bringing forward costs
  3. Capital allowances
  4. International tax 

When doing business abroad, International tax planning can assist you in income tax saving all over the world. International tax planning strategies include: 

  1. Timing of tax bills
  2. Using tax deferral opportunities
  3. Foreign tax credits
  4. Avoiding double taxation
  5. Dividend/year-end tax planning

If you expect to carry a big profit in your ltd. this year, then a tax consultants will be able to advise you on the most tax-efficient way to pay yourself and your employees.

Inheritance tax

Paying Inheritance Tax (IHT) when you die may reduce the amount of your estate that ends up being passed on to loved ones. There are IHT saving opportunities involving the family home such as:

  1. Gifting property
  2. Downsizing
  3. Remortgaging & insurance options.

It is also possible to use available strategies involving pension funds. Seeking expert advice may be a wise investment to minimize tax & protect your wealth. 

Tax Management – How To Save Tax in Business in India

All business houses are liable to pay and manage taxes. In general, tax management relates to the management of finances for payment of tax, assessing the advance tax liability to pay tax in time. It involves analysis of a financial situation from a tax perspective. The primary motive of tax planning is to ensure tax efficiency.

Even though it has nothing to do with planning to save tax, tax management is related to the operational aspect of payment of tax, i.e. while managing his taxes an individual ensures that he/she is making timely payment of taxes without running out of the cash. The taxpayer has to ensure that he/she is complying with all the provisions of the law. This way, a business can know how to save tax in business in India.

There are four types of tax management. They are as follows:

Short Range Tax Planning

Short range Tax Planning means the planning thought and executed in a short term, at the end of the financial year to reduce taxable income in a legal way. At the end of the financial year, one might find his/her taxes have been too high in comparison with last year. Now, in order to reduce it one might make some quick plans to get the maximum tax rebate u/s 88. Despite making no long term commitment, these short term tax plans results in substantial savings in tax.

Long Range Tax Planning

In this type of tax planning, a business house prepares a plan which is chalked out right at the beginning of a financial year. Such kind of planning may not give instant results, but they have a positive impact on your tax liabilities in the long run.  

Permissive Tax Planning

It is a method of reducing your tax duties under the provision of tax laws of the country. It involves taking advantage of the various deductions, concessions, and incentives. Say, you decide to take advantage of Section 80C specifically, this specific planning is called permissive tax planning.

Purposive Tax Planning

Under this, you propose for tax saving with a selected purpose to enjoy maximum benefits. Income tax saving can be done with proper selection of investments, correct replacement of assets, etc. 

Tax management means the management of finances, for the aim of paying tax. Well, in an increasingly demanding global environment, managing tax responsibilities and planning for tax is becoming more complex. Now that, you are clear about how to save tax in business in India, start saving tax by investing in ELSS funds. Download the Sqrrl app now.

Written by

Priyanshi Bhardwaj