Hey Mr Taxman
It's that time of the year when everyone and their uncle is busy collecting bills, investment papers, the form 16 and bank statements � all to make sure the Income Tax department is convinced we are honest taxpaying citizens. But while evading tax is a heinous crime punishable under the law, saving tax is simply a way to live smart. Chartered Accountant ALPESH GANDHI explains 10 ways a consultant, professionals on annual contract or freelancers can save tax
Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman
If you drive a car,
I’ll tax the street
If you try to sit,
I’ll tax your seat
If you get too cold,
I’ll tax the heat
If you take a walk,
I’ll tax your feet
‘Cause I’m the taxman
THE Beatles were not far off the mark when they sang this ode to the tax man in the 1970s. Only, it is no longer just five per cent but a whopping 30 per cent of our total income that the IT department wants. For consultants it is lower, with a basic 10 per cent Tax Deducted at Source (TDS). But while evading tax is a crime, saving tax is just plain smart. With a little planning, consultants can get most of the deducted TDS back. Here’s how:
CAR SEVA: “Save all your petrol and conveyance bills in a folder. These are expenses you incur as a professional and therefore you submit for tax exemption. Just make sure you retain the bills for the next two years,” Alpesh Gandhi, a Chartered Accountant and tax consultant for over two decades, informs us.
MOBILE ON WORK: All expenses incurred on your mobile phone and landline can be submitted for tax relief, under ‘expenses incurred on business’. “Keep itemised bills handy,” says Gandhi.
CHARGED UP: Home electric bills too can be submitted for tax exemption since you do watch news on TV, charge your cell phone, work on your laptop and generally switch on the AC while working from home. Don’t you?
DEPRECIATION COST: All consultants can claim tax exemption on the depreciation value of their laptops and cars. “In the first year one can claim tax relief on 15 per cent of the original cost. So on a car that cost R5 lakh, one can claim tax relief of R75,000. In each following year it becomes 15 per cent on the reducing balance, as the car’s value also goes down,” explains Gandhi. The logic: as a consultant you use a laptop, ipad and a car to travel on work.
PRINTING AND STATIONARY: Printing visiting cards or letterheads for your new start-up? Or buying books and journals? Save all bills and submit the amount for tax exemption.
TRAVEL: If your work involves traveling to another state or city, save train tickets and hotel bills. “If you are traveling on work, it comes under professional expenses,” explains Gandhi.
FOOD: Meeting a client? Gandhi says make sure you keep the bill and if it is likely to fade, get it photocopied. “Meeting clients over lunch or dinner for work is accepted as expenses incured professionally,” he says.
RENT: If you have a house or an office on rent from where you run your consultancy, do your projects etc, please file all original documents to claim tax relief, says Gandhi.
EMPLOYMENT: Does the nature of your work mean you have to employ a peon or a driver or an assistant? “You can claim tax relief on the salary you pay him or her,” says Gandhi.
INVESTMENTS: Of course, if all else fails, there are the good old 80C, 80D, 80E and other sections under which everyone can get relief from taxation.
beware: All consultants need to pay an annual R2,500 Profession Tax. If your gross salary is above R10 lakh per annum, you need to pay an additional service tax of 12.36 per cent over and above the 10 per cent TDS.
For more details:
For Income Tax: incometaxindia.gov.in
For Service Tax: www.aces.gov.in
For Profession Tax: www.mahavat.gov.in