20 Ways to Reduce Tax Liability of your Startup
Did you know? Before March, 2017 you have all the chances to do arrangements to reduce tax liability. Startups and other businesses have already started to work on this. And, It is mandatory for all corporate assesses and partnership firms who are liable for audit u/s 44AB of the Income Tax Act to submit the Income tax returns electronically by July, 2017.
Documents to be assessed: Documents like TDS certificates/tax paid challans/ profits and loss account/balance sheet etc. shall be produced before the Assessing Officer whenever he calls for the same. Tax Audit Report, is to be obtained before the due date of filing of the return. The same is not required to be attached with the return of income. As provided in section 184 of the Act, In case of first return of a partnership firm or in case of change in the constitution of the partnership firm, certified copy of the partnership Deed is required to furnished along with the return of income so to get assessed as a partnership firm. Since no enclosures are to be furnished with the return, certified copy of the Deed should be furnished separately with the Assessing officer.
Forms to be used by different types of assesses: ITR-1: For Individuals having Income from Business or Profession. Also, If you have a profit of more than 8% of investment no Audit by CA. If profit is less than 8% or suffered loss than Audit must be made ITR-2: For Individuals and HUFs not having Income from Business or Profession ITR-3: For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship ITR-4: For individuals & HUFs having income from a proprietary business or profession ITR-5: For firms, AOPs and BOIs ITR-6: For Companies other than companies claiming exemption under section 11 ITR-7: For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D)
There are three ways to file returns electronically: Option 1: Use digital signature in which case no paper return is required to be submitted Option 2: File without digital signature in which case ITR ? V form is to filed with the department. This is a single page receipt cum verification form. Option 3: File through an e-return intermediary who would do e-filing and also assist the assessee to file the ITR Form
Procedure to be followed before filling up the form: It is advisable to keep a checklist with you along with your audit program while on audit. It is important to have the signed audit report & financial statements while filing up the forms. Following details, in case of Individual:
- Full and Correct Name of the assessee
- Correct PAN
- Full address with city, state and pin-code
- Date of formation / Birth
- Residential status
- Nature of business
- Bank A/c. No. & MICR code
- Address (with city, state & pin-code),
- Percentage of share and
- Savings account:
- if you have more than one credit card, total payment for both more than Rs.2 Lakh but each card less than Rs.2 Lakh, then information not required to be furnished.
- payment to each mutual fund less than Rs.2 Lakh
- Payment more than Rs.5 Lakh for purchase of bonds or debentures issued by a company or institution or RBI Limit of Rs.5 Lakh is qua company/institution
- Payment for acquiring shares issued by a Company.
- Details of brought forward losses i.e. head of loss, year of loss, are to be furnished in the return.
- Nature and amount of exempt income earned
- Saving under section 80 C (Annuity plan for LIC, PF etc.)
- Saving under Section 80 D (Medical insurance)
- Property Loan
- Long term capital gains from sale of equity shares
- Rent paid for office premises
- Travel, hotel expenses in name of the company,
- Expenses incurred on phone, vehicles, parking, driver, toll charges, etc
- Premium paid on medical insurance for self, spouse, children, parents;
- Salary paid to staff, even if they are family members,
- Expense that occurs prior to the commencement of business can be deducted from the taxable income under Section 35D as Pre-Registration Expenses
- Medical insurance
- Utility Expenses
- Medical insurance
- Investment in National Pension Scheme up to Rs 50 Thousand
- Rent Allowance 80GG up to Rs 2.5 Lakhs or 60 thousand
- Relief under Section 87A
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