Deductions Available from Taxable Income

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OUTSOURCE Your Accounting Work

• A brief on Tax Aspects in
• Accounting for Small Business

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A brief overview on Taxation aspects for Small
Business

• This Presentation is aimed at explaining basic
  accounting compliances for small business
• It explains the Accounting aspects which a small
  business must consider

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Taxable income

• Taxable income
• Taxable income is the net income which is
  chargeable to tax after claiming all the
  deductions.
• Allowability of deductions
• All the business expenses done for the purpose of
  business are allowable business expenses which
  can be claimed as deduction in the business
  income.
• However the expenses must be related to the
  business and it should be proved that it is
  expended for a legitimate business purpose.

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Allowability of Deductions

• Expenses which can be claimed
• All the Expenses incurred for the purpose of
  income are allowable as income if it passes
  following tests
• 1. Expense is incurred for a legitimate
  business purpose.
• 2. Expense must be paid or there is a commitment
  to pay the expense.

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Expenses which cannot be claimed as deduction

• Personal Expenses Personal Expenses like food
  and ordinary clothing are not allowed.
• Capital Expenses incurred for improvement of
  assets are not allowable as deduction from
  business income
• Preliminary Expenses incurred prior to starting
  business are not allowed in immediately first
  year of operations. However they may be claimed
  in installments.
• Deduction for GST Paid cannot be allowed if you
  claim GST as credit from GST payable by you.

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Claiming Depreciation

• For business which have a turnover of less than
  2 million, depreciation can be claimed in
  following manner

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