SME can be a very productive business venture if done right. The first thing needed for this is capital. Most people go for an SME loan online for this purpose. Not only is it a quick and comfortable way to finance your venture, but there are many SME loan tax benefits as well. Therefore, a loan is an excellent option to fund your business in the short term, as well as save money while doing it. Read on to know some of the tax benefits you can enjoy with a loan.
Reducing tax liability
When you take an SME loan, the interest component will help you reduce your annual tax liability. Since this loan counts as a “business expense”, you can easily write off the interest as a “business interest”. Therefore, you end up paying less. SME loan tax exemption is a great advantage to have, particularly since you can use the extra funds to refinance your business.
Capital gains
Another way you can claim an SME loan tax exemption is with the help of your assets. If you use the loan to purchase any asset other than property, you can take advantage of the tax benefits when you sell these assets. This is because when you buy an asset with the loan amount, you gather interest on the same. This reduces your tax liability when you sell this asset, and end up saving money. The tax rates applicable on long- and short-term capital gains decide your tax liability.
Depreciation on assets
Anything you purchase for your SME, will eventually get old. Be it general wear and tear, an accident, or just other factors outside of your control – nothing lasts forever. However, you can still enjoy SME loan tax benefits on the same. Under the Income Tax Act, you must take account of your assets and their depreciation rate. You can easily find out the depreciation rates for anything you purchase under the various classes and use it to gain tax benefits.
Purchasing capital goods
Whenever you purchase any capital goods with a business loan, you stand to cut down on input tax credit. All you have to do is add these purchases to your annual income tax filing, and it is over. You can also claim GST benefits under the government’s GST scheme. However, you cannot claim both at the same times. In the long run, some people find it better to go for input tax credit rather than GST because of profitability, but how to utilise the tax benefits is entirely up to you.
Therefore, there are multiple benefits to taking an SME loan, one of the most significant ones being tax exemptions you enjoy, and more. You can save money on every purchase you make for your enterprise, as well as have relaxation for repayment. You will also benefit from competitive interest rates and fast loan disbursal.
