How does a small business owner determine their tax bracket?
Curious about Small-Business Taxes
In India, the income tax liability for small businesses is calculated based on the taxable income earned during a financial year. The taxable income is calculated by subtracting allowable business expenses and deductions from the total revenue earned.
Small businesses in India are classified into two categories based on their annual turnover those with a turnover of up to Rs 2 crores are known as small businesses, and those with a turnover between Rs 25 crores are known as mediumsized businesses.
The income tax rates for small businesses depend on their annual turnover and are classified into different tax brackets. For example, for small businesses with a turnover of up to Rs 1 crore, the tax rate is 15% on the net taxable income, while for mediumsized businesses with a turnover between Rs 25 crores, the tax rate is 25%.
To determine the applicable tax bracket, small business owners need to calculate their total income for the financial year, including any income from their business, and then use the appropriate tax rate to calculate their tax liability.