Mostly during the initial days of launching, the startups will go frenzy. Mainly burdened by the current deliverables, there is always an erratic sense of the ascendancy, whenever the main concern is with the ideas and their executions, managing the cost of the setup and even staying true to soul. Right during financial end, these startups are mostly prepared for that initial loss, which might go unaccounted. Failing to pay attention will put your firm in tax jeopardy and might create enigmatic scenario to leverage on the present tax benefits. So, it is time to address that certain enigma and see how major the tax provisions might be there to help you with the business setup in India.
1.Set off and carry forward your losses:
There are some equal possibilities of losses in inception area. These losses are quite difficult to deal with for any businessman with idea of Setting up business in India. So, there are some ways to convert them right into benefits. At first, you can set off losses against income from business. The excess loss can be set against income from some other heads, which are subject to some few conditions. Any added loss can be carried forward for the next 8 assessment years. The business will start to get that benefit if ITRs are filed well with due dates, easily applicable to business. Any delay might cease this benefit.
2.Moving with preliminary expenses:
The preliminary expenses are mainly those incurred while Setting up LLC in India or any business. It will not limit to expenses of any form of new set up but might include extension of already existing unit. Startups have the right to procure deduction of around 5% of total project cost. A firm might choose here to calculate maximum deduction of around 5% of cost of project or even capital as employed by business. This amount is then allowed to be working as deduction equally for the next 5 years.
3.Working with the unabsorbed depreciation:
Unabsorbed depreciation is always the unutilized version of depreciation, which you cannot claim as expense mainly due to lack of profit. Learning about it beforehand will help you big time with India Entry Strategy now. Other than insufficient profit this is mainly a case of some high priced assets. It can easily be set off against any form of income in present year income. In case, depreciation remains unabsorbed still, you can easily carry forward same for any number of years.
4.Focus towards presumptive taxation scheme:
Business person is here to maintain regular account books in given manner. You can always get relief from any tedious work by just asking for this scheme. These presumptive taxation schemes are mainly framed for various taxpayers. You have Section 44AD, which is applicable mainly to the resident individual, HUF business related and partnership firm. Around 8% of the entire receipt or turnover is noted as profit and gains from business along with chargeable to the income tax.
Another one is Section 44ADA, which is for the assesse engaged right in this profession of Setting up LLP in India. In this regard, the tax is mainly applicable on around 50% of gross receipts. Last one is the Section 44AE, which is mostly applied to unit, as engaged in business of hiring, plying or leasing the goods carriages.
5.Time for the research expenses:
The scientific based research expenses are mainly associated with the business and are allowed as a deduction to some limited expenditure. Expenditure on the current research expenses is mainly dealt with section 35 of the IT Act. Around 100% deductions are mainly allowed for revenue expenses and even capital expenses u/s 35 (1) and (2). These capital expenses are mainly deductible in year where the capital expenses might have incurred. But, there will be no depreciation allowed for any such expenditure. So the expenses designed to purchase asset for any research for the initial 3 years will be deductible.
There are so many best tax lawyers in India and you would get help from their sides to know more about the tax-related details, while trying to start a business in India.