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ArticleRunning a small business gives you far more tax levers than a salaried person — but also more ways to overpay or trip a notice. Here's a practical list of the best, fully legal ways for a small business owner to save tax.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
From the 44AD presumptive scheme to expensing properly, paying family for real work and timing purchases, here's how small business owners cut tax legally.
If your business turnover is within Rs 2 crore (Rs 3 crore where cash receipts are 5% or less), Section 44AD lets you declare 8% of turnover as income — or 6% on digital/bank receipts — with no audit and no detailed books. For many small traders and service businesses this is both simpler and lighter on tax.
If your real margins are below the presumptive rate, keep books and claim every legitimate business expense — rent, salaries, utilities, raw material, marketing, travel and depreciation on assets. Genuine expenses backed by invoices directly reduce taxable profit.
Salary or professional fees paid to a spouse or family member who genuinely works in the business is a deductible expense, and it shifts income to a possibly lower slab. It must be real, reasonable and documented — the work, the payment and the TDS where applicable.
Buying equipment, vehicles or machinery before year-end lets you start claiming depreciation (commonly around 15% for general plant and machinery, higher for certain assets) this year. Plan large capital purchases around the financial year-end where it suits the business.
You can still use old-regime personal deductions — 80C up to Rs 1,50,000, the Rs 50,000 NPS, 80D health insurance — on your personal return. And since there's no employer TDS, pay advance tax in the four instalments if your tax exceeds Rs 10,000, to avoid 234B/234C interest.
A scheme to declare 8% of turnover as income (6% on digital receipts) with no audit. Available where turnover is within Rs 2 crore (Rs 3 crore if cash is 5% or less) — simpler and often lighter on tax.
Yes, if the work is genuine and the pay is reasonable. It's a deductible expense and can shift income to a lower slab, but it must be real, documented, and TDS-compliant where required.
Yes, if total tax for the year exceeds Rs 10,000. With no employer TDS, pay across the four instalments yourself to avoid 1%-a-month interest under 234B/234C.
Want to know whether presumptive or actual books saves you more? Write to the firm and we'll run your numbers.