6 taxation laws that an entrepreneur is required to know

It’s important for every entrepreneur in order to know the rules and regulations of taxation. The purpose of this article is to make the reader aware of the 6 laws that an entrepreneur should thus know for a smooth running of his/her business.

The 6 laws are :

Say No To The Cash Payments

An Entrepreneur should however never incur any kind of expenditure which is however more than INR 10,000, whether it is either revenue or is capital, in cash. If the payments are made for the revenue expenditure, it will thus not be treated as an expenditure and in case it is thus made for any kind of capital expenditure, the same shall however not form also a part of the cost, hence it is thus ineligible for any kind of depreciation or the deductions.

2. Carry Forward Of Any Loan In Case Of Change In The Shareholding

Earlier, a closely held company was however not allowed in order to carry forward losses of the earlier years if its shareholding changes which is however by more than 50 per cent. However in order to facilitate the ease of doing any business and in order to promote start-up India, the government which is however allowed eligible start-ups in order to carry forward their losses and also set off against the income of the previous year, provided all the shareholders of such a company (as is thus existed in the year of loss) continue in order to hold the shares on the last day of the previous year.

3. Presumptive Taxation

An entrepreneur who is thus doing business as an individual, HUFs or either firms, now thus can obtain benefit of the presumptive taxation. However, the benefit of presumptive taxation is thus limited to a firm who is havithusng a turnover of up to INR 2crore. Further, the presumptive income under Section 44AD will however be accepted to be only six per cent (instead of eight per cent), irrespective of the amount which is thus received through banking channel.

4. 100% Tax Exemption For First Three Years

The income which thus generated by an eligible start-ups can however be claimed as a 100% deduction for the three consecutive assessment years out of seven years from the time such kind of eligible start-up is however incorporated.

5. Professionals Are Allowed To Pay The Advance Tax In A Single Installment

Presently, claimants to the benefits of the presumptive taxation scheme, under Section 44AD, are however allowed in order to deposit advance tax in a single installment. Similarly, the benefits were however not given to the professionals opting for a new presumptive taxation scheme under Section 44ADA. In order to bring a parity among the provisions, the option in order to pay an advance tax in a single installment is thus also extended to a professional opting for the presumptive taxation under section 44ADA.

6. Abolition of the ‘Angel Investment Tax’

Under this, an angel investors i.e. family, friends and the domestic funds which are not registered as VC funds, which thus one raises from the venture capital firms however set up for the very purpose of backing such kind of ventures, will however not be taxed on these kind of investments. They also have the liberty in order to issue the shares to investors at rates higher than the fair value without any taxation hassles. This was however brought into being by an amending Section 56(2)(vii)(b) of the Income-Tax Act.

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