Biggest challenge for small business owner is loan as majority of revenue is received over counter as cash and there is absence of Income proof. Things further complicates as books of accounts are never maintained
According to government estimates, only 4 percent of 57.7 million small business units in India have access to institutional finance, leaving many to rely on informal lenders. Microfinance and non-bank financing companies currently charge interest rates of more than 20 percent, more than twice banks’ base rate, which they attribute to high cost of funds. Borrowing at such high cost of funds makes it unviable for small business to run the operations
Why Tax Returns are the best bet
When Small Businesses and freelancer need proof of income, their tax return is often your best bet. It clearly shows just how much is earned in the last year, which is generally a good base estimate of how much they earn this year — as far as a service provider is concerned. And it's a document that just about everyone trusts: no one tries to inflate their income on their taxes and run the risk of paying higher taxes, after all.
Generally last two years of return including Computation of Income, Profit & Loss Account, Balance Sheet, Audit Report etc. is asked by the bankers as Income Proof.Further, to know day to day Cashflow, Banks Statement for past 1 year is also asked as part of Income proof.
Small Business fail to provide the Income Proof as most of the small businesses and Freelancersbear the responsibility of taking care of their regulatory payments. No one else takes care of these for them automatically, unless they can afford to hire your own accountant.
When starting a business, there is no history of Income Tax returns filing, in that case Bankers would ask for Investment Proof like Fixed Deposit, Fixed Asset , Shares etc
Income Proof Is Also required for
1) Insurance Policy
2) Credit Cards
Want to know how to be SAFE FROM INCOME TAX NOTICES? Just give a missed call on Filing Mantra helpline +91-9533990091 or Email to firstname.lastname@example.org, to schedule a call with our tax experts. Filing Mantra offers FREE tips and best practices on how to save tax, be compliant and safe from income tax notices.
Previously:Itr And Income Proof