Income tax return filing is one of the major step in income tax laws compliance which is applicable to all the business and moreover, Govt had considered problems faced by small business owners & enacted Suitable for provision to give the relaxation in some compliance.
What are the benefits for small business owners available under income tax act:
There will be practical difficulties for small business owners who are having low turnover & law margin, govt had considered this problem and given relief to small business through “presumptive taxation provisions“ by which business owners can declare their profits as minimum 8% of turnover, there no need for maintaining proper books of accounts etc… this provision is applicable only to proprietor firm & partnership firm
Effect of the Wrong Declaration of Profits in income tax return filing for loan purpose
However presumptive taxation allows to declare income at minimum 8% turnover it is best practice to declare actual profits if you have accounts Why should you declare correct profits under presumptive taxation. You may earn profits of even 30% of turnover but some of the business owners still never declare actual profits to reduce the tax this will be having long-term constraints while you are going for external funding, your P&L and balance sheet may not reflect correct profit, therefore you will be having low creditworthiness. When you are looking for mortgage loans for expansion they will calculate your repayment capacity by taking profits declared in your income statements, therefore you will be having lower repayment capacity.
Effect of change of provision:
If you are declaring lower income earlier and if the there is sudden increase in profits during current year due to applicability of new provisions you income profit percentage may boost drastically, for example, if you have declared 12 % of profits under presumptive taxation for earlier years and when you cross threshold limit for presumptive taxation your profit may boost up to 30 Percentage.
Income tax return filings on time:
we should take care of income tax return filings on time. Income tax return filed on time enables claiming loss and allows filling of reversed return.
How to maintain accounts:
As we support startups & small business owners we suggest them to maintain accounts in simplified format either in the notebook or excel we will suggest proper format suitable for your business. Maintaining proper accounts helps you to ascertain actual profits & business performance.
Points to note:
Be familiar with due dates.
Maintain simplified accounts.
Submit inputs to your tax consultant on time.