Fire your tax related queries and i would get it solved!!!

[diosys]

Hi,
I want to start day trading, for this i want to invest some borrowed money.
presently i am not working anywhere. how should i pay taxes ?

Dear YDPM,

As i have already clarified in my initial posts that it would depend as to with what intention do you purchase shares....If they are for pure day trading then you would fall in the business category and tax @ 30% otherwise 10%....It will be fact based case and no general guidelines can be drawn for it...

Please feel free to ask if you still have doubt

 

[diosys]

ydpm, let us make it clear. You know the risks involved in trading, or day trading right. Also you know how to manage your money etc.. right.

Also make sure that you borrow from someone who is not going to suffer greatly if you loose all the money. Otherwise he will make you suffer for his & your loss.

From my little experience with tax laws,

1. If you take a loan of more than 20K, then get it as a account payee cheque only.

2. If you borrow it within family (ex father..) and his taxable income is lower than your's, then do pay him some intrest for the loan. So the total tax you two pay will be lesser.
The intrest you pay becomes your expense so you pay less tax.

3. Day trading is a business income, so you keep account of all expenses you make while day trading.. Office rent, computer internet bill, tea, coffee, office boy, electric bill...
Even if you do it in your house you effectively spend these and you can deduct these expenses from income.

If you foresee yourself earning more money in future, do show all expenses and even a show loss in the initial years, file tax return form, so that when you actually earns your payable tax will be less.

Again correctly said by Yoogi....

Though deduction of expenses would depend upon which segment you get classified....i.e. trader or investor !!

 

[diosys]

I need a clarification as to what can be done to get shares transferred into one of two joint holders of shares in physical form. Like I hold shares in joint names with my sister, some shares with my brother and now sister is married and brother stays separately. Some shares are with first holder as sister who is married and does not have any objection to the transfer to my name. What would be tax implications and whether transferring physical shares into my name, would it require stamp duty to be paid?
thnx

Dear....

There would be no tax implications....Simply request your sister to write a letter stating that she is under her on free will gifting these shares to you and viola it's done....No tax be paid as it is not taxable since being gift....

Pertaining to stamp duty i am not aware....

 

[diosys]

Dear dhyey...

One thing more important that i would wish to add is that please me sure that you kep that gift letter with utmost care as it would be a very important piece of evidence if yours and you sister case is picked up for scrutiny....

 

[EarthShastri]

Hi, i shall be thankful if u clear my doubts about the following:
1. Whether is it mandatory to file return for every PAN holder?
2. If not, what is the minimum income stipulated to file return?
3. What would be tax obligation in case of short term capital gains. The income is not falling under taxable range.

 

[diosys]

Hi, i shall be thankful if u clear my doubts about the following:
1. Whether is it mandatory to file return for every PAN holder?
2. If not, what is the minimum income stipulated to file return?
3. What would be tax obligation in case of short term capital gains. The income is not falling under taxable range.

Dear Earth,

1.) It is not mandatory for every PAN holder to file a return of their income....It was mandatory earlier....But last to last year the provision of 1/6 scheme was abolished and thus the need to file returns....

2.) Retrun of Income is required to be filed if your income is greater than Rs. 1,00,000 for male.....1,35,000 for female.....Rs 1,85,000 for senior citizen....Please note here that income menas the gross income and not the net income....For eg If you have earned Rs. 1,25,000 from business and then invested 27000 in ELSS scheme to avail deduction and your net income comes to below 1,00,000 then also you would be required to file your return....

Moreover please also note that the limits I have given above are only for FY 2006-07.....For the FY 2007-08 these limits have been enhanced by Rs. 10,000 in the last budget.....

3.) There would be no tax implications if your short term capital gain is below the taxable limit....

 

[hometypist]

Hi Thanks for your feedback. Just want to clarify that I dont want to evade tax but at the same time I would not want my salary to be deducted and thereby forgo the comfort and expenses that has to be incurred by me every month. If you look at it what would my salary be 15000 per month, now if out of this if i give to the government, then every month i migh carry forward negative balance for my next month expenses which I cannot afford to and moreover the government has give many ways to reduce the tax and my company has also said that I chose the break up hence this request.

I would appreciate if a break up can be given, i am living in my own house, so there is no question of rent allowance, so would appreciate a break up of the Rs.15000 per month. I dont know what ELSS is, please clarify what it is and if possible give me a break up of the above Rs.15,000/-

Thanks all.

dear hometypist,

Since you are very particular about tax reduction (or evasion), let me give you some from my own experience.

1.8 lack is definitely not a serious amount to hide from tax. Up to 3 lac try to show maxium salary to IT dept.

First 1 lac is exempted, if you invest in a ELSS, you get another 1 lack rs exemption, and for the next 1 lack, you would be paying a paltry 15,000 rs. (thats only 5% Tax. Be happy to pay that)


But if you earn 6 lac rs in 2010. Now, you would be paying about 15K + 90K = 105K per year in taxes after almost all exemptions. That is almost 17.5% of your income.

The more you earn, the higher % you pay. So when your salary is low, try to be cash rich yourself. Try to show all investments in your name. When your salary increases, that is the time you should try to move cash from yours to your wife so that you can reduce your tax burden.

 

[hometypist]

Dear Oxy, Thanks for taking the trouble to answer our queries, as advised, I am planning to open another account for myself.

Would appreciate if you can give me break up of my monthly salary since my company has given me freedom to chose the basic and allowances. My salary is Rs.15,000/-. I live in my own house so I cannot put any money under HRA. Please give me break up of the Rs.15,000/- for your information my company is also not deducting an TDS since they have given me freedom to chose the breakup and said that an CA can give me break up so that there is no tax payable. My company is only deductin Rs.300/- as Professional Fees.

Hi Hometypist...

Please note that there can be tens of ways to minimize tax but there cannot be a way to nullify the tax outgo...nor would i suggest you doing the same...Please understand why....If suppose two years down the line you wish to avail any loan then nowadays bank prefer to give loans only to those people who have strong ITR's (which of course you would not be having as it would reflect low income), so in the long run it would hurt you badly...Secondly payment of tax increases your capital for future endeavorers...The best salary structure possible does not only depend upon the assessee it also depends upon the company to what level they wish to oblige to you...Now since FBT is payable by the employer they would also like to strike a balance between their tax out go and that of the employee, hence would not offer all the concessions that they used to offer earlier...

For your second point....There is no problem in you withdrawing from an account payee cheque as it would reflect your wife's name....But for the sake of utmost clarity i would like to suggest you that you open your own account and segregate the money of your spouse from it....It would be beneficial in the long term if your case is selected in scrutiny in the department....It would save alot of hassles for you in dealing with the department who are reluctant to hear anything sensible said to them !!!

 

[diosys]

Dear Oxy, Thanks for taking the trouble to answer our queries, as advised, I am planning to open another account for myself.

Would appreciate if you can give me break up of my monthly salary since my company has given me freedom to chose the basic and allowances. My salary is Rs.15,000/-. I live in my own house so I cannot put any money under HRA. Please give me break up of the Rs.15,000/- for your information my company is also not deducting an TDS since they have given me freedom to chose the breakup and said that an CA can give me break up so that there is no tax payable. My company is only deducting Rs.300/- as Professional Fees.

Dear Typist....

The best possible breakup i can give you is as follows....This is for FY 2007-08

Basic - 9250*12 = 1,11,000
Transport Allowance - 20,000 = 20,000 (Wholly Exempt)
Reimbursement of Medical Bills - 15,000 = 15,000 (Wholly Exempt)
Uniform Allowance - 5,000 = 5,000 (Wholly Exempt)
Leave Travel Concession - 29,000 = 29,000 (Wholly Exempt)

TOTAL SALARY = 1,80,000 (As Desired)

TAX PAYABLE NIL

Points to remember -

YOU WOULD BE REQUIRED TO SUBMIT ACTUAL BILLS OF MEDICAL, PETROL, UNIFORM PURCHASED AND TRAVEL DONE....

 

[yoogi]

I dont know what ELSS is,

ELSS is Equity linked Savings Scheme, a type of Mutual fund scheme that invests more than 60% ( probably 100%) in equity and related instruments. It is almost like investing in equities under the guidance of a stock/financial adviser.

The money invested in these mutual funds are exempted from Tax, upto a limit of 100,000 rs. But you cannot take money out of this fund for the first three years. The maturity amount, prfofit (if any , after three years) is also tax free.
My ELSS has given me about 25% pa.

So instead of investing directly in Stocks, you can invest in ELSS and get exemption.
All major fund houses like SBI Mutual funds, HDFC mutual funds, etc have ELSS options.

You can also invest some money in PF account (profident fund..) which may not give you attractive returns like ELSS (but less risky..) but also exempted from tax.

Also you can use your Life insurance premium for tax exemption.

Under section 80/c of income tax act, savings in these are exempt from paying tax.
There are few more investments like NSC, Post office savings.....that are also exempted.

If you want to save some money, and get exemption for that, you can either use PF or ELSS or combination of both.

If you use diosys's break up, you need to actually spend money (or atleast produce bills for that.) That directly answers your question about break up of your salary.If you have problems with any of such expenditure, then you can use one or more of the savings mentioned here as exemption.