What is the difference between tax deductions and tax credits for small businesses?

Tax deductions and tax credits are two different ways for small businesses to reduce their tax liability.

Tax deductions refer to expenses that can be subtracted from a business’s taxable income, thereby reducing the amount of income that is subject to taxation. Examples of tax deductions for small businesses in India include employee salaries, rent or lease payments, office supplies, businessrelated travel expenses, and depreciation of assets.

On the other hand, tax credits directly reduce the amount of taxes owed by a business. Tax credits are typically offered for specific activities or investments, such as investing in renewable energy or hiring employees from certain demographics.

Overall, tax deductions reduce the amount of income that is subject to taxation, while tax credits reduce the amount of taxes owed by a business. It’s important for small business owners to take advantage of both deductions and credits in order to minimize their tax liability.