How to Save Tax for Startups and Freelancers?

In today's time, the trend of startups and freelancing is growing rapidly. But when it comes to paying taxes, many startups and freelancers do not know how they can save taxes

If you are also running a startup or working as a freelancer, then this blog will be very beneficial for you. Here we will tell you in simple language how you can save tax and make your business more profitable.

1. Get business registration done to save tax

If you are a freelancer and working individually, you may have to pay higher income tax. But if you register your work as a Private Limited Company, LLP or Sole Proprietorship , you can avail many tax benefits.

Which Business Structure is Right for You?

  • Sole Proprietorship: For small freelancers and solo businesses
  • LLP: For two or more freelancers or partners
  • Private Limited Company: If you are starting a startup and want funding

2. Claim business expenses in taxes

If you are running a startup or are a freelancer, then you have many expenses which you can save tax by showing them as business expenses.

Which expenses can be claimed in tax?

  1. Internet and Mobile Bills – If you use your mobile and internet for work, you can show it as business expenses.
  2. Office rent – ​​If you have taken an office or have converted a part of your house into an office, then you can claim its expenses in tax.
  3. Software and Subscriptions – If you use Canva, Adobe, Microsoft 365, or any other software, you can claim its cost in taxes.
  4. Domain and hosting charges – If you have a website or blog, the cost of its domain and hosting can be added to the tax.
  5. Marketing and Advertising – The cost of advertising on Facebook, Google Ads or other platforms can also be added to the tax.
  6. Payment to freelancer – If you hire another freelancer for work, this can also be added to business expenses.

3. Use GST correctly

If your annual income is more than ₹20 lakh (₹10 lakh in some states) , you should register under GST .

Benefits of GST:

  • Benefit from Input Tax Credit (ITC) – If you are GST registered, you can get back the GST paid on your business expenses.
  • Opportunity to work with big companies – Many big companies work only with those freelancers and startups who have GST number.

4. Save tax under section 80C

If you are a freelancer or a startup owner, you can get a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act .

On what things can tax be saved under 80C?

  1. PPF (PPF - Public Provident Fund)
  2. EPF (EPF - Employees' Provident Fund)
  3. NSC (National Savings Certificate)
  4. Life Insurance Premium
  5. Equity Linked Savings Scheme (ELSS)

5. Get discounts on health insurance

You can get tax exemption on health insurance under section 80D .

  • Up to ₹25,000 discount for yourself and family
  • If parents are senior citizens, then discount of up to ₹ 50,000

6. Save tax on home loan

If you have bought a house and taken a home loan, you can save tax on home loan under section 24B and 80EEA .

  • Discount up to ₹2 lakh on home loan interest
  • Additional ₹1.5 lakh discount for first-time homebuyers

7. Get discounts on business travel and other expenses

If you are travelling for work, you can save tax by adding your ticket, hotel and other expenses to business expenses.

What travel expenses can be claimed?

  • Flight and train tickets for business meetings
  • Cost of staying at the hotel
  • Taxi and petrol expenses to meet the client

8. Invest in NPS (National Pension Scheme)

If you are planning for your future, you can invest in NPS (National Pension Scheme) . Under this, you get additional tax exemption of up to ₹ 50,000 under section 80CCD (1B) .

conclusion

If you are running a startup or working as a freelancer, then it is very important for you to know about tax saving methods. With proper planning and proper use of government schemes, you can save tax up to several lakhs of rupees.

What to do to save tax?

  • Register your business
  • Claim business expenses in taxes
  • Use GST wisely
  • Take advantage of section 80C and 80D
  • Invest in health insurance and NPS

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