Whether an individual or a business, everyone has to pay tax to the government. Since 2016, the taxation process for small businesses and start-ups has undergone a drastic change. Different policies are introduced by the government to promote business. The entrepreneurs hire the services of Goods and Services Tax Consultant in India to get the benefit.
In recent times, the ministry of finance has made some more presumptive schemes, especially for the small business. Those traders who have manufacturing, retailing, trading, and wholesale can opt for the presumptive scheme of taxation u/s 44AD. Before the announcement, the chargeable income was 8% of total income but now it has become 6% of the deemed profit. In this way, the total tax saving can be at least 40%.
In India, small business entrepreneurs enjoy many tax benefits.
- Three Years Tax Holiday:
To boost entrepreneurship, the government of India has announced a 100% tax deduction in the first three years of operation. It is applicable for those companies only that are registered as start-ups under the Department of Industrial Policy and Promotion. All the businesses must include innovation, development, deployment, or commercialization or technology-driven products or services to be eligible for the three years’ tax exemption. Another important fact is that for these three years of period, those eligible small businesses should not have to pay any type of tax except Minimum Alternate Tax or MAT which is calculated on book profit.
- Exemption on Capital Gains:
If any company sell the capital assets like stocks or bonds, then they have to pay the capital taxes on the profit from the sale. Recently, the government announced a 20% exemption on the capital gains tax. Before the announcement, many start-ups demanded this provision from the government. Earlier, the companies have to route their investment through Mauritius as investment capital gain tax was waived off following the Double Tax Advance Treaty.
- Turnover Taxes:
The government has levied 25% tax plus cess along with surcharge on the newly established manufacturing units. The companies with less than 50 crores per annum turnover are bound to pay 29% only as of the tax. The small and medium-sized companies that have a minimum turn over less than 50 crore rupees have to pay tax at the rate of 25%. Additionally, the claiming profit linked tax exemption period is now extended to 7 years from 58 years.
- PDF payment of the government:
Earlier the EPF (Employees’ Provident Fund) contribution was 12% of the basic employee’s salary which is now has become 8.33% for three years. It helps the start-ups to cut the cost and instead they can hire more competent employees who will get job security.
For every entrepreneur, it is mandatory to hire the GST Consultant in India to maintain the accounts books. In case, the company is under the presumptive tax scheme, then they don’t need to maintain the book which is actually a financial relief for the companies.