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

From where I can get travelling and medical bills I don do any travelling or Not admitted in an hospital how can i do that. Please let me know

Dear,

If you visit a doctor then the doctor cannot give you the same pill as he had given to the previous patient....He firsts checks and then finds the solution for the same...

Hence if you require help then please give the breakup of your income and how much would you earn in the next FY (what has gone by cannot be rectified)...then only i can suggest you a method of reducing your liability....

My annual income is 2,45,000 to 2,50,000. Now can you help me with it.

Invest the maximum possible under section 80C....and should be out of the tax net....

On Rs. 2,50,000 the tax payable by you for the fy 2008-09 would be Rs. 10,000 provided you invest nothin under 80C...

Dear Diosys

Finally a thread I was searching for ! I have tried to get an answer for my query with local experts but not got any.

I quit my regular job last April 07 to do freelance jobs. The year has been exceptionally good because this is the first time ever I am coming under tax slabs I hope it remains next year too

Ok, I do freelance jobs for foreign clients (mostly US) from my home. I understand that this income under Business Income and I have to file ITR-4. Please correct me if I am wrong.

Are there any special rules or deductions for foriegn source of income. Though I earn in foreign currency, it comes to my bank after conversion in rupees.

I have only gathered bits and pieces of information here and there and not sure which way should i go. Some say, since you are earning from foreign source, IT is totally exempted, while others say it is flat 10% no matter whatever you earn. There are others who say it is same as any Indians pay because though the income is from foreign source, the base is in India that is I am working from India.

I also need to know how can I reduce my liablilty. Let us take an example of 3.5 lacs. So this is what I understand.

a)Standard Deduction : 1.10 lac
b)Investment (PPF, MFs etc) 1.00 lac (which I have already made :-)

So the balance comes now to 1.4 lace (3.5 less 1.10 + 1.00). This 1.4 is taxable income, i understand. Of course some portion of it can be still deducted as expenses incurred.

Now inorder to reduce my liablity, can i show communication expenses like the internet connection or part of my electricity bill ? I have a colleague who is helping me. In return, I pay some lumpsum amount about 3K per month. Can I include this ? I am just confused.

The last question is can I make statements on my own regarding income and bank details in MS Excel, fill up ITR-4 and keep a file ? I mean is it too complicated. I have just about 25-30 records to show. The reason being most of the experts in my area which is rural is not aware of this term of foriegn source. They are only confusing me more.

Thanks in advance

Regards

Jeet

PS: IF only you could list me point wise what excatly I should do, I will follow that and ease
my head.

Dear Jeet...

Answers to your queries go like this...Anyhow i would like you to remember that never compare the advice of two professionals...it will more often than not make you tizzy...choose your professional and follow him or her...

Anyways answers to your query:-

1.) Yes this is business Income and ITR 4 would be required to be filed.

2.) In my view your entire income is taxable in India...See for an Income to be taxable in India , you would be required to see the residential status of the individual and then from where the source is...In your case i presume that you are a resident of India...Here resident is different from citizen...in order to be a resident you have to be more than 182 days within India....

3.) For the reduction of your tax liability...
there is nothing as Standard deduction now....so no such deduction of 1.1 Lacs...
Secondly yes you would be allowed Rs. 1 Lac deduction for the amounts you invest in eligible schemes...
Since you show your income as Business Income, you would be allowed all such deductions which you have stated plus depreciation for the assets put to use...Even your colleagues expenses would be allowed...Simply putting any expenditure that you do for earning that business income is allowed as a deduction from it !!

4.) ITR-4 is readily available at the Income tax website...the address for the same is

http://law.incometaxindia.gov.in/Tax...spg.aspx?smd=1

...anything else ??

Thank you Diosys for your detailed reply.

I have couple of more queries but would like to ponder over what you have written before coming back to you. I just dont want to rush just because you are giving free advice

At this point, I am not clear about just one comment from you :

"3.) For the reduction of your tax liability...
there is nothing as Standard deduction now....so no such deduction of 1.1 Lacs... "

Are all citizens NOT exempt for the first 1.1 lacs they earn (from this year onwards it has been raised to 1.5 lacs)

I was under the impression that for arriving at NET TAXABLE INCOME one has to follow this method.

Let me cite an example where the assessee's GROSS income is Rs. 2,50,000
For Year 2006-2007

1) According to the Income Tax Slab, the first 1,10,000 is not taxable.
2) Now the person invests in 1,00,000 in PPF, NSCs, MFs etc

So his taxable income is

2,50,000 less
1,10,000
---------
1,40,000 less
1,00,000 (Investments)
---------
40,000.00
----------
I now understand that the person has to pay 10% of 40,000 i.e Rs. 4000.00 as Income Tax. If he further includes his business expensses, probably he will not have to pay any tax at all.

Correct me if I am wrong.

Thanks once again

Regards

Jeet

Dear Jeet,

I can only laugh....ha ha ha ha ha..

Dont worry i am not laughing on you but the confusion prevailed by you using the words Standard Deduction....The limit of Rs. 1.1 lacs is not called standard deduction but is called "BASIC EXEMPTION LIMIT"....There is a difference between the two....

Yes you are correct with regard to basic exemption limit but the method of calculating is wrong...

Basic exemption limit is not deducted it is available...please appreciate the difference between the words....Its important...

Calculations would be different as there are various slabs....

Go through some of my earliest posts wherein i have explained how to calculate the same....

How will you decide the cost of acquisition of a house 60 year back when there is no record available with the owner today?

Dear Diosys,

I hope you can give greater clarity on the following matter. I have read the other topics which cover this issue but I just wanted to confirm.

As I understand it 40 lakh and above turnover in derivatives requires audit, and that the total is calculated by adding up the net gain and loss figures. The futures part seems straightforward enough but is there something more required when calculating the options figures?

I think I read that for options the premium amount is also taken into account. For example, for the following nifty option trades what would be the correct figure?

Put option January bought 2000@90
Put option January sold 2000@300
Profit is 420000

Call option March bought 1000@100
Call option March sold 1000@80
Loss is 20000

So the final reckoning, is it 420000+20000 = 440000 or

is it 420000+20000+(2000*90)+(2000*300)+(1000*100)+(1000 *80) = 1400000?

Anticipating your reply.

Thanks.