Professional vs salaried

Tax planning 7090 views 3 replies

SK

26 Points Joined August 2011

Hello All,

First thanks to forum for contribution & collection of huge information.

I'm working as "operation head" in India. I worked as "professional" till last 4 yrs & my CTC till end of March 12 is 904000. For last 4 yrs my company deducted TDS i.e. 10.3% monthly & I claimed almost 80 to 85% refund after filing balance sheet.

Now as company is growing my HR dept is claiming that I may exceed to 10 Lac P.A. & as per them my deduction will be 12% service tax + 10.3% TDS per month & I can only claim refund of TDS bur service tax will remains non-refundable & so it's beneficial for me to be salaried employee.

If I become salaried I can plan following max steps to save tax.

Deductions under Sec. 80C, 80CCC & 80CCD: Max 1 Lac

Deductions under Sec. 80CCF for Investment in Infrastructure Bonds: Max. Rs. 20,000

Deductions under Sec. 80D for Health Insurance: 15000

Deductions under Sec. 80D for Health Insurance of parents: 20000

Deductions under Sec. 80DDB. : Max. Rs. 40,000/-.

Income Net of Income Tax Liability: 708695

(Calculator link : https://www.investwellonline.com/taxcal/tax_calculator.htm)

Income Tax due: 96305 (Which is Fixed – Non refundable tax)

Question : Please advice which is the best way to save my tax ? Which step I should take ? Should I choose “Salaried employee” or “Be as a Professional” ?

Please advice.

Thanks & Regards,

Nashikar

Replies (3)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

Being an professional would be more preferable than an salaried, as in case of a business, you can claim deduction of all the expenses incurred for the purpose of your profession. Also depreciation can be claimed on the assets used by you for the purpose of your business such as Car, Coputers, printers, furniture, building.

To save tax you can also show a number of deduction but they should be genuine for the purpose of reducing tax liability.

Apart form these you can also deductions under chapter Vi-A, as mentioned by you above in your question.

Unlike under saalry, the quantum of deductions is very limited, you get deduction only under Chapter Vi-A max upto say 100000, then profession tax of only 2500.

So I think doing an busines is more beneficial than working as a salaried.