Principle 17. Pay your taxes.

Income tax is never an easy subject to understand, especially in India. It’s important to pay your tax bill after properly planning it and pay what’s due to the government. That’s our responsibility. It’s not only about being responsible. Having a tax clearance has lot of advantages. Here’s a list of points that came into my mind in no particular order:

Standard income proof:

The income tax return is considered as a valid income proof not only in India but also globally. If you are looking for higher education or employment overseas, your present tax status may add more credibility to your application.

Fast loans

These days, if you are not paying income tax, it would be difficult to get a loan sanctioned in your name.  But if you have all the tax papers, it immediately creates an impression that you are a responsible citizen and that you’ll not make default in repayments.

PAN Power

The PAN or permanent account number card is a valid proof for your signature and date of birth. This card is required for all monetary transactions above a certain limit. It’s also required to buy a car, to open bank accounts, to subscribe to mutual funds and to invest in stocks.

Excess refunds.

Bank and financial institutions are required to collect tax at source. By promptly planning and filing your return, you may get tax credits.

Avoid enquiries /penalties and fines.

Income tax law imposes severe penalties and fines for those who are not proper in disclosing and filing tax.

BEFORE FILING RETURNS:

The income tax Act contains various provisions that may help you to reduce you tax bill. It may not be possible for everyone to understand the language of law and hence, it’s prudent to consult a tax practitioner who will guide you on the matter. By properly planning your tax, you can reduce your tax liability to the minimum. By planning we mean an early planning of tax – not at the fag end of the deadline. Tax planning is done by legitimately using tax exemptions, rebates, reliefs and deductions to your advantage. To utilize the provisions of deductions, you may be required to invest money in certain instruments like tax saver bonds or life insurance premiums or may be required to donate to eligible schemes of the government. All this cannot be done just before the deadline. There is a time limit for making such investments and payments. Following steps should give a brief idea about how to plan your tax:

  • First list down all your sources of income. Possible sources can be – employment, business, profession, gains from selling assets like land or shares, winnings from speculation, interest, dividends, rent, commissions and brokerage.
  • Estimate the total income for the year from each source.
  • Add up everything and you get your expected total income.
  • If you have incurred loss from any source, make sure that you’ve deducted it from the total. You need to pay tax only for the net amount.
  • Calculate the probable tax liability.
  • See if you can make any investments or donations that are allowed as deductions. Such investments would reduce your tax liability. Keep minimizing your projected tax by utilizing all those provisions. You may require the services of a tax consultant for this.
  • Keep your tax bill at the minimum. If you’ve done that, you’ve planned your tax bill very well.

CONCLUSION
That’s principle number seventeen! Be regular on tax payments. Plan and pay your tax. You need to pay your taxes so that you can be proud that you did  your bit for the development and prosperity of your country.

You may like these posts:

  1. Principle 10. Have a Monthly budget
  2. Principle 14: Multiple streams of income.
  3. Principle 5: Cash reserves and idle cash.

6 Responses to “Principle 17. Pay your taxes.”

Suhel

July 5, 2013 at 12:25 am

What is the rate of tax on income from selling of shares

J Victor

July 5, 2013 at 8:40 am

Taxation on sale of shares depends on how long you have held it as investment. if it is less than one year 15% and if it is more than a year, you need not pay any tax.

Manish Gupta

October 11, 2013 at 4:06 pm

One of the Good One article. I like it. I want to know more about this topic. if u have any other link please share it with me

Mahesh

February 10, 2014 at 8:46 pm

If there is any loss from selling of share, Can I avail any Tax compensation?

J Victor

February 24, 2014 at 2:56 pm

definitely, yes.

Roshni

August 1, 2016 at 8:35 pm

Wonderful conclusion – “You need to pay your taxes so that you can be proud that you did your bit for the development and prosperity of your country.”

I agree too. :)

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