Hi Friends, I was just wondering how to reduce the income tax in a legitimate way. I am a freelancer/ professional/ self employed person and I have income from India as well as outside India. Here I will not talk about the payments received by me from Indian buyers. Till now, whatever I have earned (gross) from outside India, I have withdrawn them through banks. And I have few workers who work for me and they get a good amount of money as their fees from my gross income. Suppose, My Gross is 3,90,000 INR p. a. And I pay to my workers 1,00,000 p.a. and other expenses incurred by me to run the said freelancing profession is 40,000 p.a. (say, pc charges, internet, house rent, blah blah...) Then my Net income becomes - 3,90,000 - (100,000+40,000) = 260,000 p.a. Thus I have to pay Income tax at - 260,000 INR - 160,000 = 100,000 x 10% = 10,000 INR 1.Now my question is should I pay my Indian workers directly via paypal? 2.Whether money deposited in Paypal or such account is treated as Income irrespective of whether we withdraw the money via Indian bank or not?
Well if u have a lady member in ur family who isnt working you can show some amount as her income.. and if u can u can pay u workers via paypal if they agree
Best is to pay your workers via paypal dude. THATS THE BEST WAY! I do the same for all of my employees. And for taxation, even Im worried. I should be going to my CA this week or else, I will be hung upside down.
well pay using PayPal, so you'll have already deducted your "staff's" payments before you withdraw money so what you get in your bank will be actually what you are earning... another thing that comes to my mind is, you can continue to use some of the "other" withdrawal methods like CC withdrawal and any other which you can manage that will dilute the net incoming income in your 1 bank account and will not cause many raised eyebrows. Also, invest 1.00 lacs per annum - that's the most direct method of saving some tax .. thn pay up what yu think you can't evade .. India needs it
We all are interested in growth of india, not in growth of politicians and corrupt officers. during 1980's Rajiv Gandhi (ex. pm. of india) in his speech told that only 15% reaches to the bottom line of any package announced. So the point is we pay tax for the growth of nation and secure environment, but unfortunately that is not the case with us.
lets stop making excuses for not paying taxes. We should save as much tax as possible coz it's not evasion, it's govt procedure and then we can use some underhanded methods of saving too(like earning / receiving some funds in name of wife/mother), but at the end of the day we should pay up what's due coz that's our turn to return to the country .. else how are we better than those corrupt politicians if we resort to similar corruption.
+1 . After deducting whatever is legitimate, pay the tax due. It's not much per year and let's remember that it's because of the infrastructure provided by the government (such as banking, organizations giving us Internet, printing money etc) that we're able to earn at all. India needs the money now to cover it's fiscal deficit and to continue to fund petrol subsides and continue with social programs etc etc...
Thanks friends for all the suggestions. I wasn't looking for any tax evasion techniques. What I was looking for is ideas which can help me to reduce tax burden in the most legitimate way.
Its good to know you are not looking to evade tax. that being said, you can save some by investing in PPF, Tax saving mutal funds, post office deposits, LIC etc.
I dont think IT dept. could track your paypal credits. The money which you withdraw and gets credited into your Bank Account would be considered as Income. However your Net Income is calculated after deducting the respective expenses. Talk with a Income Tax Consultant and he/she would be able to offer a proper advice on saving more money on your taxes.