Business Income Tax: What Every Entrepreneur Needs to Know
Running a company means dealing with taxes, and business income tax is the biggest piece of that puzzle. If you’re unsure whether you owe tax, how much, or what you can write off, you’re not alone. This guide breaks down the essentials, shows you where the savings hide, and gives you a quick checklist to stay on the right side of the tax office.
What exactly is business income tax?
Business income tax is a levy on the profit your company makes after expenses are deducted. In India, companies file their returns under the Income Tax Act, while sole‑prop traders use the Schedule C of the personal return. The tax rate varies – small firms often pay 25 % on profits, larger ones 30 %, and the new Domestic Companies Tax (DCT) can be lower if you meet certain conditions.
Key point: profit is *not* the same as revenue. You only pay tax on what’s left after you subtract legitimate business costs. Those costs are the goldmine for lowering your liability.
Top deductions you should claim today
Most entrepreneurs miss out on easy write‑offs. Here are the biggest ones you can start using right now:
Operating expenses – rent, utilities, internet, and phone bills are fully deductible.
Employee salaries and benefits – wages, PF contributions, and health insurance all count.
Depreciation on assets – equipment, computers, and furniture lose value each year, and you can claim that loss.
Business loan interest – the interest portion of a loan is a tax‑deductible expense (the principal isn’t).
Marketing and advertising – online ads, flyers, and even certain sponsorship fees reduce taxable income.
For a deeper dive into deductible expenses, check out our post “Small Business Tax Deductions: What Expenses Are Write‑Offable in 2025”. It walks you through documentation and common pitfalls.
Another often overlooked area is the owner’s draw. If you’re a sole‑prop, the money you pull out isn’t a salary, but it’s still taxed as personal income. Our guide “Is an Owner's Draw Taxed?” explains how to handle it without a surprise bill.
Don’t forget GST. If your turnover crosses the threshold, you need to register and file GST returns. The post “GST Registration in India: Who Needs It and Why It Matters” gives the exact limits and steps.
When it’s time to file, most businesses use the ITR‑6 form (for companies) or ITR‑4 (for presumptive income). Filing online through the Income Tax Department’s portal is free, and you’ll get an acknowledgement receipt instantly.
To avoid penalties, keep these habits:
Maintain separate bank accounts for business and personal funds.
Store all receipts, invoices, and bills – digital copies work as long as they’re clear.
Reconcile your books monthly, not just at year‑end.
Set aside 30 % of profit each month in a dedicated tax account.
Following these steps reduces stress and cuts the chance of an audit. If you’re still unsure, a qualified chartered accountant can review your books and spot hidden savings.
Bottom line: business income tax doesn’t have to be a mystery. Know your profit, claim every legitimate expense, file on time, and keep clean records. That way you keep more cash in the business and stay compliant with the tax authorities.
Navigating the tax obligations as a small business owner can be daunting, especially when determining how much income mandates a tax filing. This article unravels the income threshold requirements, ensuring small businesses know exactly when they are required to file taxes. Understanding these fundamentals not only keeps you compliant but also helps in efficient financial planning. Equipped with interesting facts and practical tips, this piece aims to guide business owners through the maze of tax requirements.
