Startup India, the scheme launched last year by PM Narendra Modi initiated India’s journey towards being a startup pro nation. The initiative included a slew of measures for encouraging the young entrepreneurs of the country to come up awesome ideas. In return, the government shall help them in actualizing them and turning it into sustainable businesses. The government went one step ahead and blessed the startups with perhaps the biggest boon, income tax exemption. We are sure that you know that already, because since you are reading this blog you are well-aware of such news related to startup. For those who are uninitiated, this announcement means that a startup wont be required to pay income tax for the 1st three years. Even if they earn profit! Not only that, the scheme frees them from capital gains as well.
That being said, the 1st three years duration may sound like a lifetime, but it actually runs out quick. After which, you are required to pay the piper and that is when the troubles start as most of you may only have a faint idea about taxation and stuff. So, what to do then? Answer is, learn how to do tax planning for your startup and save a few dimes on tax?
Hold onto Records dearly for tax benefits:
Tax deduction are going to be your best friend if your are looking forward to save some money on taxation. Fortunately, the expenses incurred while running any business as a solopreneur is allowed to be deducted against revenue generation. To put in in simple words, if your working capital is Rs. 100, depending on your tax bracket you may save up to 30 bucks. All you gotta do is to keep the records squeaky clean and preserve them for at least 6 years.
Figure out how expensive is your startup?
Taxation is all about laws and acts and statutes. For instance, under section 35 D of the income tax act, 1961 your preliminary expenses are deemed allowable. So, as your business is commencing into the world, as long as its a kid venture, the extension of an undertaking or setting up a new unit shall be categorized as a preliminary expense. One fifth of of the qualifying expenditure is allowed as a deduction, better calculate what your startup cost is.
There are bunch of ways in which you can do some good for your startup by saving money, which truthfully a business needs. As they say, a wealthy business is a healthy business. We will be hear with some more tips on how to do tax planning for your startup and keep it healthy-n-wealthy! Stay tuned to Pick My Story!
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