As the financial year draws to a close, it’s the perfect time for businesses to review their finances and plan their taxes smartly. Year-end tax planning not only helps reduce tax liability but also ensures that your business stays compliant with legal requirements. A little preparation now can save you from last-minute rush, errors in filing, or missed tax-saving opportunities.

Many businesses overlook important deductions, delay advance tax payments, or miss claiming Input Tax Credit (ITC), leading to penalties or higher tax outgo. This blog will guide you through practical and easy-to-follow tax planning tips that can help your business make the most of the financial year-end. From reviewing your books to claiming deductions and planning investments – we’ve got you covered.

Let’s explore how simple steps taken now can lead to big savings and smooth closure of your financial year.

Review Your Financial Statements

The first step in tax planning is to take a close look at your business’s financial statements. Reviewing your income, expenses, and profit and loss reports helps you understand where your money is going and how much tax you may need to pay.

By analysing your income, you can estimate your total tax liability for the year. Looking into your expenses helps you check if all eligible business expenses have been properly recorded. Sometimes, common expenses like rent, utilities, repairs, staff salaries, or travel are missed or not properly categorised which can lead to missed deductions.

Also, by checking your profit and loss statement, you may find opportunities to reduce taxable income. For example, you might decide to make necessary business purchases, invest in new equipment, or pay off pending bills all of which can help lower your taxable profits.

A thorough review now ensures accurate reporting and allows you to make informed tax-saving decisions before the financial year ends.

Claim All Eligible Deductions

Claiming all the eligible deductions before the financial year ends is one of the smartest ways to reduce your business’s taxable income. Below are some important deductions that businesses can claim under the Income Tax Act:

1. Business Operating Expenses

You can claim everyday business expenses such as:

• Rent for office or factory space
• Electricity and water bills
• Telephone and internet charges
• Employee salaries, bonuses, and PF contributions
• Office supplies and consumables

2. Depreciation on Assets (Section 32)

If your business has purchased assets such as machinery, computers, vehicles, or furniture, you can claim depreciation on them each year. This is a non-cash expense but helps in reducing your taxable profits.

3. Interest on Business Loans (Section 36(1)(iii))

Interest paid on loans taken for business purposes — whether from banks, NBFCs, or other sources — is fully deductible.

4. Bad Debts Written Off (Section 36(1)(vii))

If there are any amounts that your business couldn’t recover from customers and have been written off as bad debts, they can be claimed as a deduction.

5. Prepaid Expenses

Some prepaid expenses, like annual subscriptions or insurance premiums paid in advance, may also be partially claimed if they relate to the current financial year.

6. Donations to Approved Funds (Section 80G)

If your business has made donations to government-approved charitable trusts or NGOs, you may be eligible to claim 50% or 100% of the donated amount as a deduction, depending on the organisation.

7. Employee Welfare Contributions (Section 36)

Contributions made towards employee welfare schemes like gratuity funds, employee welfare funds, and insurance can be claimed as business expenses.

Make Use of Section 80 Deductions

Utilising Section 80 deductions can help businesses and individuals lower their tax liability. Here are the key deductions to consider:

1. Health Insurance Premiums (Section 80D)

• Deduction available on premiums paid for health insurance of employees (for proprietors and partners too).
• You can claim up to ₹25,000 per year for self, spouse, and dependent children (₹50,000 if aged 60+).
• Preventive health check-ups (up to ₹5,000) are also included in the total limit.

2. Contributions to Pension Funds

• Section 80CCC: Deductions on contributions to certain pension plans (LIC or other approved insurers).
• Section 80CCD(1): Deduction for self-contributions to the National Pension Scheme (NPS) – up to 10% of salary (or gross income for non-salaried).
• Section 80CCD(1B): Additional deduction up to ₹50,000 for NPS contributions – over and above 80C limit.

3. Employer Contributions to NPS (Section 80CCD(2))

• If a business contributes to NPS on behalf of employees, it can claim deductions up to 10% of the employee’s salary (basic + DA).
• No overall limit under Section 80C applies to this deduction.

Pay Advance Tax on Time

Paying advance tax on time is an important step to avoid interest charges and penalties. If your total tax liability for the year exceeds ₹10,000, you are required to pay advance tax in four instalments. The instalments are due on the following dates: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. It is important to calculate your total estimated income, including earnings from salary, business, or any other sources, to determine your tax liability.

By accurately estimating and paying the required amount on time, you can avoid the interest charges that are levied for delayed payments under Section 234B and 234C, which can add up to 1% per month. Additionally, missing deadlines could lead to late fees and penalties, which can affect your financial planning. Paying your advance tax on time ensures that you don’t face unnecessary financial burden and can effectively manage your cash flow.

Pay Advance Tax on Time

Paying advance tax on time is crucial to avoid interest and penalties. Here’s what you need to know:

When to Pay Advance Tax

• Advance tax is payable if your total tax liability for the year exceeds ₹10,000.
• Tax payments are divided into four instalments:
  • 15% by June 15
  • 45% by September 15
  • 75% by December 15
  • 100% by March 15

How to Calculate Advance Tax

• Calculate your total estimated income for the year, including income from salary, business, or other sources.
• Estimate your tax liability and pay the required amount in instalments.
• Ensure that the calculations are accurate to avoid underpayment, which could result in penalties.

Avoid Late Payment Penalties

• Paying advance tax on time helps avoid interest charges (1% per month) and penalties under Section 234B and 234C.
• If you miss a deadline, you may also face a late fee along with the applicable interest.

Final Thought

Tax planning is a crucial aspect of running a successful business, especially as the financial year comes to a close. By reviewing your financial statements, claiming all eligible deductions, utilising available tax credits, and paying your taxes on time, you can ensure that your business stays financially healthy and compliant. Smart tax planning not only helps you save money but also allows you to reinvest those savings into growing your business.

Remember, tax laws can be complex, so it’s always wise to consult with a tax professional to ensure that you’re maximising your savings and avoiding any costly mistakes. A little effort now can go a long way in securing your business’s future.

Need help with your business’s tax planning?

At Satyanarayan Goyal & Co LLP, we offer expert guidance and tax solutions tailored to your business needs. With over 30 years of experience, we ensure you’re making the most of tax-saving opportunities. Contact us today to optimise your tax strategy and take your business to the next level!