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7 Tips to Save Tax in Private limited Company

Author: Gaurav Bansal
by Gaurav Bansal
Posted: Mar 07, 2017
private limited

Private Limited Company is a company with limited liability. It is a company which has greater flexibility. The private limited company is preferred choice for start-ups. The company has a significant degree of separation between operations and ownership. This type company requires minimum two directors.

Every company starts its business with the motto of having good and greater profit. People work hard for having the good sale of their goods and services. The company having good figures on books of account is because of hard work of the sales. The system of any company is the sales and then the profit.

Tax saving is the important option for every company regarding income of a company. This is because you might end up paying significant amount of taxes to the government every year. The business owner has income from almost every head except the head ‘Income from Salaries’.

Here are some points to save taxes in private limited company

Sitting fees to Director

There are some new rules notified under Company’s act, 2013. A company may pay the sitting fee to a director for attending meetings of board or committee. These sums as may be decided by the Board of Director which shall not exceed 1 lakh per meeting.

Salary to Director

It is the easiest way of saving tax in private limited company. Normally, founder of the company takes out the profit from the company in the ratio of equity but if instead of taking that profit as dividend. A person can take that part as salary which is an allowable expense for the private limited company.

Meeting and Vehicle Expense

Events like dinner with client and outing for any other event tax deductable. People usually socialize and have a lot of meetings and visits several places. These should be booked in the proper manner.

Normally company do not own a vehicle and use director’s vehicle for travelling and meeting. This is not just fuel but also repair maintenance of a vehicle. These expenses save high amount company’s tax. These require proper documentation and planning to take a maximum and true benefit of it but that is really worth doing.

Start-up expenses

There are certain charges paid for drafting MOA and AOA. This includes printing cost of documents, fees paid to ROC, stamp duty the etc. There are some expenses incurred after private company incorporation process.

Family Members Salary

Starting a business sometimes requires assistance and guidance from your family members and friends. In some cases, a family member usually helps you in your business throughout your struggle which is not for any monetary benefits. A person should be good tax planner by book keeping their salary as an expense in books of the company which is ultimately bringing your profit portion at your home again with dual tax benefits.

Entertainment Expense

Expense on the celebration when some success has been achieved in that case you might celebrate with partners or members. Including that expense under company’s expense is very good practice. It is similar to the concept of discount of some percentage which is related to tax saving of some percentage.

Capitalizing capital asset and depreciation

In this process, the expense is shown on the balance sheet rather than the income statement. In some cases, expenditure is expected to help the company generate revenues for a long period of time.

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Author: Gaurav Bansal

Gaurav Bansal


Member since: Feb 16, 2016
Published articles: 19

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