Tips for startups filing tax returns for the first time

Every citizen or business with a taxable income need to file taxes and startups are no exceptions.  For the startups filling ITR for the first time, it is not an easy process. Everyone has potential to become the big business owner but they have to start small. What scares most startups is tax aspect. They encounter problems like how to deal with tax liability, what tips should be kept in mind, how to make more profit by saving taxes legally. If you are also a startup you do not need to worry as we offer the solution of your problem.

Gather information about your tax liability

It is compulsory to understand the different arena of taxes. A startup has to pay income taxes on the profit incurred during the financial year. If one renders a service and the income earned is more than Rs. 10 Lakh a year then service tax need to be paid at the rate of 14 percent. If the amounts received is higher than Rs. 25 Lakh then assessee needs to get a tax audit done. The Even assessee has to pay advance tax. If the startup is registered as a partnership then partner need to file returns individually and startup needs to file separately.

TDS need to be considered

If a customer pays in excess of Rs.30 thousand a year as professional fee then he is required to deduct TDS at the source and remit the rest amount to the professional. At the time of drawing amount, the professional needs to account this TDS and file the returns accordingly. TDS is applicable for the individual partnership as well as startups including sole proprietorships, partnership firms, and companies. Tax is applicable on any income on which TDS has not been deducted.

Tax filing forms vary in different cases

Tax law is very complicated to understand because of changes happening during each budget or whenever government feels like to do so. Income tax forms are different for different type of assessee. So, this is a very important task to identify. One has to identify the correct form while filing income tax return. For instance, in the year 2015-16 one has to used ITR3 Form for filing return as a partner in the firm while ITR4 Form in case of income from presumptive business and ITR5 Form for partnership firms. This Form may change from year to year. Before filing your ITR for your startup please refer the income tax notification or take help of a tax expert.

Startups business expenses can be used to reduce tax liability

One of the biggest advantages of startups is that expenses which are directly related to running business are allowed to be deducted from income while gathering your tax liability. Another benefit is that expenses prior to the commencement of startup can be claimed as preliminary expenses and are liable to be deducted. Expenses on rent, postage, vehicle expenses, travel expenses, telephone, and internet expenses are liable to be deducted. Partners can be paid salary provided this is specifically mentioned in the partnership agreement and this salary is also liable for deduction. Point to be noted that partner salary will be taxed as in the capacity of income in the individual returns of the partner.

Please keep transaction records handy-

You must have to keep the fair record of all the transactions done in the business capacity. You cannot hold the third party responsible for mistakes in tax calculations and return fillings. This is the responsibility of the assessee to keep all record and when demanded he could produce them. As per the law assesses is required to keep the record for at least 6 years. Handling taxes is a more complicated task for startups but they always have the option to take help of qualified professional.

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