There are tons of tax resources available online which claims to make better tax filing plans and decisions, while equally makes tax season less stressful for small traders.
As the financial year draws to a close, many businesses focus on a variety of important yearly business assessments like internal audits, yearly projections, performance review and most importantly- Taxes.
Indeed, it is one of the most significant yet unavoidable business evaluations which every business owner will make during the fiscal end.
Not many are aware of most significant tit-bits of tax planning. To remain informed and in control of their taxes, here are 5 easy tax planning tips for wellness entrepreneurs.
1. First and foremost for business to be successful tax planning should be only used as an ancillary tool and not the main objective as it can result in advertently in tax evasion or tax avoidance under various statutes in vogue in the country.
2. The first requirement of tax planning should be to do capital expenditure in the month of September and get depreciation break for the whole year. Have income done on accrual basis instead of following cash basis as many in the wellness sector do to avoid disallowances.
3. Ensure that there is only one set of accounts and based on tally avoid duplication and wrong entries, which lead to wrong revenue recognition and consequently higher charge of taxation.
4. Ensure that strictly payment above Rs 25,000 is by cheque, to avoid disallowances of expenses. Also, it should be ensured that payments of salaries are done as per norms and do not pay consultant fees as it can lead to disallowance. This may help the employee in tax outflow but hurts the company as when a salaried employee there should be a higher TDS. Or else violations and all tax penalties are disallowances.
5. Non cash charges should be properly amortized with a basis of amortization to avail of tax benefits and do also depreciation. Provision should be done and availed of only where there is a genuine expense and ensure that it is paid before availing of an expense. Bad debts should be written off after board approval to get tax breaks. Carry forward losses can be set off completely only if it has unabsorbed depreciation or else MAT comes into play.
Significantly, it is extremely essential to always have consistency in accounting policies and best practices to avoid disallowances or income not recognized, which comes under the ambit of taxation.
This article is written by G Ramachandran, Promoter & Director, Gold’s Gym India, as per his personal views and experience.