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Businesswire
Tax Benefits That Every SME Owner Should Know About
July 24, 2019
Business Wire IndiaSME sector is a highly dynamic sector which provides numerous employment opportunities in the Indian economy. According to The Economic Times, the MSME sector comprises around 40% of India’s workforce and consists of around 42.5 million businesses. Therefore, to improve ease of doing business for the SME sector, the Government of India extended a lower corporate tax rate of 25% was to businesses with annual turnovers up to Rs.400 crore via the recent Union Budget. This was earlier available to business with an annual turnover of up to Rs.250 crore.
Apart from initiatives made by the Government to boost growing businesses meet their financial requirements on time, lenders like Bajaj Finserv also help SMEs meet working capital requirements, purchase inventory and invest in equipment by offering convenient funding solutions. The Bajaj Finserv SME Loan offers up to Rs.30 lakh at a cost-effective interest rate, on a collateral-free basis. What’s more, the SME loan makes you eligible for annual benefits. Take a look at what these are, as well as the other tax benefits that you should know of as an SME owner:
Reduce your tax liability by accounting for interest paid
When you take an SME loan for your business, you can reduce your annual tax liability via the interest component of the loan. The interest you pay on the loan is the cost of borrowing the loan. This amount is what you pay your lender in addition to the principal you have borrowed. It counts as a business expense and lowers your taxable amount, in turn reducing your tax liability.
Lower your liability by bringing down your capital gains
In case you use a personal loan as an SME loan to buy an asset other than property, remember to claim tax benefits that you qualify for when you sell the asset at a later date. In such a situation, the interest component is added to the cost of acquiring the asset, thereby lowering your capital gains. In turn, this reduces your tax liability in the financial year in which you sell the asset. Your tax liability is computed keeping in mind the tax rates applicable on short- and long-term capital gains.
Claim depreciation on assets
Over time, the value of the assets you purchase reduces or depreciates. This happens due to general wear and tear and factors such as technological advancements. As a taxpayer, you can claim this depreciation at the time of determining gains from your business. In fact, as per the Income Tax Act, it is mandatory for you to compute depreciation on your assets as per the rate prescribed for various asset classes. Here are a few examples of depreciation rates applicable for FY2019–2020: 10% on fittings and furniture, 60% on computers and software and 15% on cars.
Enjoy the benefits of input tax credit on purchase of capital goods
As per the GST regime, you can enjoy a tax benefit when you purchase capital goods for your business. These are assets such are at the core of the product or service that you create. So, whether you use an SME loan to purchase machinery or vehicles, remember to claim input tax credit and thereby lower your tax payments. However, keep in mind that while buying an asset, if you claim depreciation on the GST paid, you can’t also claim input tax credit.
Now that you know about the tax benefits you can claim when you fund your business with an SME loan both directly and indirectly, don’t hesitate to apply for one with simple eligibility terms. Not only does the Bajaj Finserv SME Loan not require collateral, but it also offers speedy loan processing. It takes just 2 documents to apply for this loan and you need not visit a Bajaj Finserv branch; a representative will collect them right from your doorstep. To get started, check your pre-approved SME loan offer. Doing so gives you an instant approval through a customised deal.
Source: Businesswire
Apart from initiatives made by the Government to boost growing businesses meet their financial requirements on time, lenders like Bajaj Finserv also help SMEs meet working capital requirements, purchase inventory and invest in equipment by offering convenient funding solutions. The Bajaj Finserv SME Loan offers up to Rs.30 lakh at a cost-effective interest rate, on a collateral-free basis. What’s more, the SME loan makes you eligible for annual benefits. Take a look at what these are, as well as the other tax benefits that you should know of as an SME owner:
Reduce your tax liability by accounting for interest paid
When you take an SME loan for your business, you can reduce your annual tax liability via the interest component of the loan. The interest you pay on the loan is the cost of borrowing the loan. This amount is what you pay your lender in addition to the principal you have borrowed. It counts as a business expense and lowers your taxable amount, in turn reducing your tax liability.
Lower your liability by bringing down your capital gains
In case you use a personal loan as an SME loan to buy an asset other than property, remember to claim tax benefits that you qualify for when you sell the asset at a later date. In such a situation, the interest component is added to the cost of acquiring the asset, thereby lowering your capital gains. In turn, this reduces your tax liability in the financial year in which you sell the asset. Your tax liability is computed keeping in mind the tax rates applicable on short- and long-term capital gains.
Claim depreciation on assets
Over time, the value of the assets you purchase reduces or depreciates. This happens due to general wear and tear and factors such as technological advancements. As a taxpayer, you can claim this depreciation at the time of determining gains from your business. In fact, as per the Income Tax Act, it is mandatory for you to compute depreciation on your assets as per the rate prescribed for various asset classes. Here are a few examples of depreciation rates applicable for FY2019–2020: 10% on fittings and furniture, 60% on computers and software and 15% on cars.
Enjoy the benefits of input tax credit on purchase of capital goods
As per the GST regime, you can enjoy a tax benefit when you purchase capital goods for your business. These are assets such are at the core of the product or service that you create. So, whether you use an SME loan to purchase machinery or vehicles, remember to claim input tax credit and thereby lower your tax payments. However, keep in mind that while buying an asset, if you claim depreciation on the GST paid, you can’t also claim input tax credit.
Now that you know about the tax benefits you can claim when you fund your business with an SME loan both directly and indirectly, don’t hesitate to apply for one with simple eligibility terms. Not only does the Bajaj Finserv SME Loan not require collateral, but it also offers speedy loan processing. It takes just 2 documents to apply for this loan and you need not visit a Bajaj Finserv branch; a representative will collect them right from your doorstep. To get started, check your pre-approved SME loan offer. Doing so gives you an instant approval through a customised deal.
Source: Businesswire
