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Here are Some Tips to File Income Tax Returns
for SMEs in India

If you own a business in India, you need to file your income tax returns (ITR) every year. This is applicable for all types of businesses, irrespective of their size and income. SMEs in India are also mandated by the law to file their taxes every year within the due timelines. However, filing the ITR can be slightly complex. SMEs, particularly, need to be careful of a few parameters when filling their ITR. 

Here are some tips to file ITR online for SMEs in India:

  • Organize your tax documents: A major problem that SMEs face while filing taxes is the lack of proper data and documents. As a cautious measure, maintain your financial records truthfully and holistically. Represent all information correctly. Organize your documents, such as your SME loan proof, subsidy papers, etc., and ensure they are in order before filing for the tax return. 
  • Take advantage of allowances and provisions: When filing the ITR, be careful to use the different tax benefits and allowances available to SMEs. For instance, if you have an SME loan, you can easily reduce your annual tax liability. Since business loan interest rates is the amount you pay to procure the loan, it is considered an expense and is deducted from your annual taxable income. 

Moreover, if you have a business loan that was used to buy an asset other than property, you can also get tax benefits when you sell that asset in the future. Your business loan amount will lower the capital gains for the business. 

  • Charge depreciation on your assets: The assets you have in your business are liable to general wear and tear. As a tax-paying business, you can claim depreciation on these assets, even if they were originally procured through a business loan. The depreciation amount will lower your taxable income by reducing the value of your asset.
  • Claim input tax credit on capital goods: As per the GST regime, if a business buys capital goods, such as machinery, vehicles, etc., a tax benefit can be claimed. For example, if you took an SME loan to buy machinery or other similar capital goods, you can claim the input tax credit and lower your tax liability. However, if you have already claimed depreciation on those assets, you cannot claim input tax credit too. 
  • File your tax in time: Each year, the Income Tax Department issues timelines for tax filing for businesses, including SMEs. Generally, for partnership firms and LLPs, the due date is 30th September, after the end of the financial year. If you don’t file it within this date, you will not be able to carry forward any loss incurred during the year.

Conclusion

Filing ITR is beneficial for SMEs as it improves the credibility of the business and helps to take advantage of tax provisions applicable on business loans. If you need financial business aid, look closely at the business loan eligibility from reputed financial institutions and use the business loan EMI calculator to understand your EMI, and ultimately your taxable income. 


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