Sole proprietarship: tax question

according to data provided by you , Rs 20 Lakh is your income
you shall have to pay income tax on your earnings

Thanks Dinesh. So, doing some Math here:

My revenue = 30 laks

I pay around 4.5 lakhs in Service taxes ( @ 14%)

I incur around 10 lakhs expenses

So, I am left with 15.5 lakhs

Now, I pay around 25%-30% tax on this.

So, I am finally left with around 11-12 lakhs!

Is there something significant (apart from PPF/LIC etc.) that can be done to reduce this liability? Things such as changing the structure of the company, HUF etc. Sorry, I don't know this stuff too well, and hene, just throwing some possibilities.

You need to pay income tax on 20 lacs (not 15.5 lacs). Here is the calculation:

Revenue 30 L (exclusing service tax)

(-) Expenses 10L

Balance 20L (pay tax on this balance).

1. It is beneficial to do business under proprietorship concern because income tax slab rates are applicable. In case of HUF also, it is the same. But if you change the constitution to firm/company, flat rate of tax is applicable (higher than individual rate). But one has other benefits in case of company/LLP.
2. Tax planning: Expense accounting is the area which helps you to reduce your tax liability. Make sure you account all the expenses in order to get the benefit.
3. Deduction: Being proprietorship concern, you may claim deductions u/s 80C to 80U (as applicable). Many of such deductions are not applicable for companies/firms.