So many of you have dared to launch your own business and side hustles amid this pandemic and achieved great success. You are earning pretty well and good but, what about the enormous taxes you ought to pay on it? You are probably paying more taxes than the profits you’re earning and, that’s taking your business through a hard time.
If you are a business owner or freelancer reading this blog post, then you’re at the right place as I’ve listed below 10 business expenses that you can claim and save your hard-earned money on taxes as a business owner and increase your wealth.
1. Rent your home office to your business
Let’s say you have a room in your house that you dedicate entirely to your work. You have your work desk, work supplies, laptop, printer, etc., kept in that room. Consider this room as your (home) office, which it already is, and work out an estimated rent for this room for the month. Say, if you have a 2BHK house and one-bedroom dedicated for business then, 1/3rd of the rent of your home can be worked roughly as rent for your office.
Add the cost of utilities such as electricity, internet, phone bills to the expenses, and charge it to your business. Transferring the amount (rent+cost of utilities of your home office) monthly from your business account to your personal account will help you in saving a portion of taxes
2. Home office assets as business assets:
What if I tell you the assets like the chair, study table, bookshelf, or even the TV or air conditioner you have installed in your ‘home’ office are a part of your business? Yes, you read it right! You can make your house furniture and office equipment your business assets and save taxes on them.
You might be wondering how you can do that?
So, what you got to do is-
- You treat these assets as fixed assets of your business and charge depreciation on them as the year’s expense.
- You deduct expenses incurred for up-keeping these assets like maintenance or repair. For example, AMC charges for Air conditioner repair every year for your home office is your business expense.
- If you have registered under GST, take the GST credit.
- If you have bought these assets on loan, pay the EMI from your business account.
Now you ask How to calculate the expenses?
- Pay for the purchase of these assets from your business account and record the purchase receipt for business filing.
- File the receipts of purchase and maintenance of the assets in the name of your business.
3. Home-cooked lunch.
I’ve got you an idea to save taxes by having your lunch from home. If your mom/wife/house-help is cooking your meals, then hire them to cook lunches for you every month from your business.
How do you work out these expenses?
- Assign a market value per meal, say INR 250 per thali for a person. It will include the cost of veggies and labor. Now this will be your monthly business lunch expenses.
- Transfer the amount from your business account to your mom/wife’s account. In the case of house help, you can take the cash out from your business and pay.
4. Mobile as a business asset.
Your mobile can be considered an asset to your business if you are using it to answer client calls, check emails, update IG, and other social profiles for your business, take photos for your business, etc.
Let me tell you how you can save some taxes by considering your mobile as an asset for your business.
- Pay for the purchase of your mobile from a business account. Give your business GST number to the mobile vendor at the time of buying.
- Take the receipts of the purchase and maintenance of this asset in the name of your business.
- Charge depreciation on the mobile as an expense for the year.
- Deduct expenses incurred for insurance (a must) of the mobile, phone covers, or even a scratch guard.
- If you have registered under GST, take the GST credit on your mobile.
- If you have bought your mobile on loan, pay the EMI from your business account.
5. Pets in the office
Is your pet around while you work at the office or your home office?
I was faced with this situation while auditing a tech company this year and saw dog expenses in the client’s books. Upon checking with the client, I got to know that the dog has been the office pet, and all the staff plays with the dog, and it helps keep the office stress free.
I didn’t find anything specific which does not allow these expenses for a business. Hence, I gave a green signal for the client to add this as a business expense.
How do you work out the expenses? You ask.
- Charge for pet grooming, feeding, and vet expenses to your business. While buying supplies for your pet, take the receipts in the name of your business instead of yours.
Another way to saves some money on taxes is to claim transportation charges if you use a vehicle. It might be your own/your parent’s/your spouse’s.
How do you work out the expenses?
- You pay the rent to your personal account/your spouse’s a/c from your business account to use the car for your business.
- If the vehicle you’re using is on loan, you can even pay the EMI from your business account as rent for the same.
- Apart from the car rent, you can also pay for petrol/diesel, car wash, car maintenance, driver’s salary from the business, and claim expenses.
NOTE: Don’t forget to keep the receipts for petrol every time you get the car refilled. Also, take the car wash/ maintenance bills in the name of your business.
7. Cab expenses
Firstly, save your business credit card as the default payment option for your Ola and Uber apps. It will ensure that all your business cab bookings will get recorded for your business.
For recording your business bookings, you can use the in-app facility in the Ola and Uber apps to keep track of the trip for your business. The apps let you mark the client you are using the ride for.
For accounting, Forward all the details of the business trips you took using the cab service to your accounting team.
8. Latte and lunches with clients
The main thing to remember here is that the expense made on a latte is done solely for your business. For example: meeting your prospective client/existing client, prospective employee, business seminar, etc. Hence, it is necessary to record the details. The details like
b. money spent, the vendor’s invoice will have the place mentioned. Additionally, you need to mention the purpose and name of the person on the invoice. Click a picture of the invoice and save it in your google drive as it would be helpful for you to submit the information to your accountant.
How do you pay for these expenses?
- Use your business credit card as the mode of payment. It will ensure none of your expenses get unrecorded.
9. Business tour
If you are traveling to attend some conference or meet a prospective client, or check the viability for a new business location or take some time off to reflect on your business and thinking new business strategies, etc. It is required to note the purpose of your business travel. You must note down the daily business activities you did on tour. For example: attending the conference, meeting potential clients, scouting possible associations, planning for change in the firm’s marketing strategy, etc.
How do you pay for these expenses?
Pay for your flight tickets, visa charges, travel insurance, hotel expenses, meals for travel days from your business credit card.
10. Happy hour drinks
Who doesn’t love winding down the day with some drinks at happy hour?
Happy hour drinks are business expenses if you go out with your office colleagues/partners/existing or prospective clients and discuss some business over the meeting or celebrate with your team as a part of staff welfare. The important thing here is that it should be done in your business and restricted to a couple of drinks.
How do you pay for these expenses?
- Use your business credit card as a means of payment. Doing this will ensure none of your expenses get unrecorded.
- Keep a record of the people you went with and the business you discussed during the meeting.
48% (on an average) of what you spend as a business goes out in the form of taxes if you do not claim the expenses incurred. You can save almost half of your wealth if you properly account for your business and stay updated with your business books.
The cost of complying with your books is so much lesser than the wealth you can create by saving taxes legally. Hence, choose wisely!
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