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Tax related to Company/LLP

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27 May 2023 I want to understand Taxation for company. Let say I started an IT service company (LLP) with initial investment (capital) of 1,00,000 Rupees. I got a service contract for 1,00,000. I paid 50,000 in Salaries and used another 50,000 to buy Laptop for the employees, so 0 money left in company account, then at the end of Financial year how am I suppose to pay tax 30% as no money left in account and Laptop is considered as Asset and not Expense and Capital should not be touched?

27 May 2023 The difference between capital and revenue is very important to understand. When people think of capital, they tend to think of assets such as money or property. However, revenue refers to money received from sales of goods or services. In other words, a company’s capital is the money it has available to invest in growth, while its revenue is how much it sells its products or services for.

This article provides a broad overview of the differences between capital and revenue, with examples of how each impacts business operations.

What is capital?

Capital is the money that a business needs in order to run. It is the sum of money that an individual or company has invested to produce goods and services. This includes cash, stocks, bonds and other assets that can be converted into cash. In the case of a startup, capital will usually come from friends and family members or investors.

Any things brought for a company come under capital assets. The income or investment spends on such buying falls under capital expenditure. They are liable for depreciation and purchasing new when necessary. Thus, all physically tangled things are capital for a firm. Capital affects income and expenditure sheets in a business. However, capitals are not liable to generate high revenues always. You cannot share or combine your capital with a third party.

Examples of Capital
In the past, capital was mostly physical currency. But now it can also come in digital form such as cryptocurrency and shares. Capital may refer to tangible things such as land, buildings and machinery, intangible assets such as intellectual property or goodwill, or financial instruments such as stocks and bonds.

What is revenue?

Revenue is the amount of money that a business earns from its products or services. It is usually measured as the net profit after all expenses have been deducted. Revenue is an important metric for companies as it gives them an idea of how successful they are at making money and whether they are growing or not.

Revenue can be generated in different ways, for example, through sales, advertising, subscriptions, donations or other sources.

Revenue expenditure comes when you have to distribute with investors. It can be used in many ways as re-investment, to maintain depreciation cost, or as an owner’s profit. It is majorly shown in the profit and loss accounts. One can utilize revenues for meeting business expenditure, research, and development and keep it aside to deliver profits to the investors or partners in a business.

Difference between Capital and Revenue
Let’s explore the key differences between the capital & revenue below:

Capital is thus a resource used to finance the acquisition of goods or services. It can be used for many purposes, such as investment and business. Revenue is what a company earns from its products or services. The difference between capital and revenue is that capital is an asset, which can be used in future, whereas revenue is what a company earns from its products or services.

27 May 2023 Sir, thank you for explaining in detail difference between Capital and Revenue. However, my doubt is not cleared, how is company supposed to pay tax if there is no money left in account. For sure there is revenue of 1,00,000 and 50,000 is expense and remaining 50,000 is invested back as tangible good (capital) in the company.

28 May 2023 The LLP has to manage other expenses also, like salary, day to day sundry expenses, office rent, light bill etc.. How are them managed? This is also one of such liability. No excuse for lack of funds, get loan or delay the payment and pay interest with penalty, if any.

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