Zinka Logistics Solutions, the parent company of logistics giant BlackBuck, has received two tax notifications amounting to INR 14.2 crore. This encompasses a demand of INR 10.02 crore from the Assistant Commissioner of Commercial Taxes (Audit), Bengaluru, for the period from April 2020 to March 2021, and a demand of INR 4.18 crore from the Office of the Deputy Commissioner of Income Tax (TDS). The initial order, given on February 24, 2025, concerns the company purportedly misappropriating input tax credit (ITC) under GST amounting to INR 10.02 crore, as stated by BlackBuck in an exchange filing.
The notice states that the total tax liability is INR 2.88 crore under IGST, INR 3.56 crore under CGST, and INR 3.56 crore under KGST. Furthermore, the corporation has been mandated to remit an interest of INR 7.67 crore and a penalty of INR 1.02 crore.
Company’s Response
The logistics company stated in a separate exchange filing that the Income Tax agency had issued a tax demand for default for short-deduction/non-remittance of TDS totalling INR 4.18 Cr (with interest). According to BlackBuck, the firm feels it has a good argument on the grounds of both rulings. An appeal against the order will be submitted by the corporation to the relevant body. BlackBuck is a B2B marketplace for intercity full truckload (FTL) transportation that was founded in 2015 by Rama Subramaniam, Chanakya Hridaya, and Rajesh Yabaji, both of whom were graduates of IIT Kharagpur. Through its tech-enabled platform, it instantly links truck drivers with companies that need to ship.
BlackBuck’s Financial Outlook
After going public in November of last year, the company’s consolidated net loss increased 145% from INR 19.57 Cr in the previous quarter to INR 48.03 Cr in Q3 FY25. In Q3, however, it incurred INR 69.44 Cr in share-based payment expenses and INR 8.45 Cr in IPO expenses. The business would have reported a profit of INR 29.86 Cr from ongoing operations if not for these extraordinary factors. Meanwhile, its operating revenue increased 41% from INR 80.86 Cr in Q3 of FY25 to INR 113.98 Cr.
How BlackBuck Operates?
More than 93% of BlackBuck’s income comes from contract trucking. Additionally, it offers clients telemetry services that allow them to follow all trucks in real time, keeping an eye on their shipment during the entire process. Additionally, BlackBuck has a partnership with banks and marketers of petroleum goods for which it serves as an agent. It collects a commission for handling the management and distribution of radio frequency identification (RFID) tags.
The remaining amount of operating revenue is generated by these supplementary services. In exchange for business from the trucks it rents, the corporation receives a commission of roughly 15–25%. Its platform features truck services that are appropriately described, and its job is to match clients with trucks in an intelligent manner based on the needs of each individual. The heart of every invention is logistics.
Finance Minister Nirmala Sitharaman announced on Tuesday 23 July, during the presentation of the Union Budget for 2024-25, that the government has proposed to repeal the angel tax on all asset classes. This move will greatly benefit the startup environment. Angel tax, which is a provision in the Income Tax Act known as Section 56 (II) (viib), applies to privately-held companies where the consideration for the issuance of shares exceeds their fair worth. Following the budget announcement, the changes to the angel tax system will take effect on April 1, 2025, and they will be relevant for the assessment year 2025–26. The startup and VC community has long advocated for the elimination of angel tax.
Industry’s Reaction
“The Union Budget 2024 is a significant step forward for India’s growth, focusing on empowering women in the workforce, supporting employee welfare, and driving innovation. The allocation of over INR 3 lakh crore for schemes benefiting women and girls, along with new initiatives like skilling programs and salary support for first-time employees, highlights the government’s commitment to gender inclusivity and employment generation,” stated Swati Bhargava, Co-Founder of CashKaro.
She elaborated further by stating that eliminating the angel tax for all investors is a huge win for businesses, creating an environment that is more creative and dynamic. For online companies, a significant step towards tax relief and economic expansion has been the lowering of the TDS rate on online purchases from 1% to 0.1%. Further evidence of progressive tax policy is the plan to decriminalize TDS delays until the tax return is filed and the six-month-long examination of the customs duty structure. All things considered, these steps will lead India into a better and more inventive future by boosting growth and development in the economy.
Echoing similar sentiments, Megha Gambhir, Founder and CEO at Stupa Sports Analytics said, “The removal of angel tax is a big boost for the Indian startup ecosystem, and will make the path for startups like ours easier, so we can focus on building innovative tech solutions without previous financial burdens. Additionally, the announcement of investing in sports infrastructure in states like Bihar is positive news to continue developing sports at the grassroots level in our country. This will eventually lead to more facilities, academies, and sports centers integrating cutting-edge tech solutions in the coming years, and transform the way sports are played, viewed, and organized”
Pramod Gummaraj, Founder of Aprecomm opined, “The proposed abolishment of angel tax is a landmark decision that will significantly boost the Indian startup ecosystem. By removing this hurdle, the government is encouraging early-stage investments and fostering a conducive environment for innovation. This move will be particularly beneficial for sectors like technology and telecom, where funding plays a crucial role in driving research and development.”
Adding further to his comment, he said that the telecom industry also welcomes the renewed emphasis on city planning. Strong and dependable communication networks are becoming more important as cities develop and thrive. Opportunities for telecom software as a service (SaaS) providers like Aprecomm to aid in citywide digital transformation and better residents’ quality of life will arise as a result of investments in urban development.
“We also welcome the abolition of the 30% Angel Tax for all investor classes. This move will encourage more angel investors to support startups, fostering innovation and growth in the startup ecosystem,” said Manish Aggarwal, CEO & Founder, of FINQY.
Vidita Kochar, Co-founder at Jewelbox said, “The recent reduction of customs duty on gold to 6% marks a significant advancement for the jewelry industry, enhancing its competitiveness and making it more accessible to consumers. This move aligns seamlessly with our commitment to providing high-quality, affordable lab diamond jewelry to our customers. Additionally, the abolition of the angel tax is a laudable initiative that will invigorate India’s startup ecosystem. This change is poised to spur innovation, attract global investors, and provide a substantial boost to startups. We are confident that these measures will significantly contribute to the growth and dynamism of both the jewelry sector and the broader startup community in India.”
Gunjan Agarwal, Co-founder of XYST commented, “Abolishing Angel Tax will have a long-term impact on startup founders. This will not only motivate angel investors but also help to encourage entrepreneurial spirit in the Indian business domain. Additionally, the job generation push, coupled with the government’s financial assistance will help startups acquire more talented professionals, leading to cumulative growth in the long term. This Union Budget is full of opportunities for Indian startups pushing to become the next Unicorn, and governmental assistance is bolstering it to ensure success and growth.”
Mahankali Srinivas Rao (MSR), CEO, T-Hub stated, “Budget 2024 marks a significant milestone for the Indian startup ecosystem, with initiatives that will undeniably foster innovation and growth. The abolition of the Angel Tax for all classes of investors is a pivotal move that will create a more supportive environment for angel investments, ultimately benefiting startups and paving the way for India to become a global innovation hub. The establishment of a INR 1,000 crore venture capital fund dedicated to boosting the space sector is another forward-thinking initiative. This substantial investment will propel growth in the space economy by supporting innovative startups and groundbreaking research, positioning India at the forefront of space technology and exploration.”
In 2012, India implemented an angel tax to combat the problem of unreported wealth, namely that which arises when a closely held company receives funding from Indian investors that exceeds its fair market worth. Not only will this measure bring tremendous relief to existing investors, but it will also attract new investors due to the easing of taxes.
The Startup India campaign, an initiative of the Government of India was first announced on August 15, 2015, by Prime Minister Narendra Modi during his Independence Day speech.
The event was, then, inaugurated on January 16, 2016, by the former Finance Minister of India, the Late Arun Jaitley. Venture Capitalists, Startup Founders, and CEOs of various companies were recorded to attend the event.
The action plan of this initiative primarily focused on three areas –
Simplification and Handholding
Funding Support and Incentives
Industry-Academia Partnership and Incubation
Another primary action area of this initiative was to discard restrictive State Government policies applicable to this domain like License Raj, Land Permissions, Foreign Investment Proposals, and Environmental Clearances. This was organized by The Department for Promotion of Industry and Internal Trade (DPI&IT).
The Indian government defines a startup as an entity that is headquartered in India, has been operating for less than 10 years, and has an annual turnover of less than INR 100 crore (USD 13 million). The Indian government’s I-MADE program, under the Startup India initiative, aims to help Indian entrepreneurs build 10 lakh mobile app startups.
The second program is the Pradhan Mantri Mudra Yojana (MUDRA Bank’s Scheme) which aims to provide micro-finance and low-interest rate loans to business owners from low socio-economic backgrounds. In the year 2020, an initial capital of INR 20,000 crore (USD 3.0 billion) was allocated for this scheme.
Eligibility for Startup India Campaign
To be recognized as a startup under the Startup India action plan, a company must fulfill certain conditions –
Should be less than 10 years from the date of registration/incorporation.
Should be registered as a Private Limited Company, a Partnership Firm, or a Limited Liability Partnership.
Should have an annual turnover not exceeding INR 100 crore for any financial year since incorporation/registration.
Should be working towards innovation, development, or improvement of products, processes, or services.
Should be a scalable business with a high potential for employment generation or wealth creation.
Should not be formed by splitting up or reconstructing a business already in existence.
Tax Exemptions Allowed Under Startup India Campaign
Startup India Official Website
To promote the growth of startups within the country, the Indian government has extended the following tax exemptions for eligible startups.
Three-Year Tax Holiday in a Block of Seven Years
All the startups that have been incorporated between April 1, 2016, and March 31, 2021, are eligible within this scheme which was extended to 31st March 2022 in the Budget of 2021. These startups will be eligible to receive a 100% tax rebate on profits for a period of three years in a block of seven years.
The condition for receiving this benefit is that the annual turnover of the company should not exceed INR 25 crore in any financial year. The aim of this scheme is to help startups to meet their working capital requirements in the initial years of operation.
Tax Exemption on Long-Term Capital Gains
The Income Tax Act’s new section 54 EE specifies that the eligible startups will be exempt from taxes from long-term capital gains if such a long-term capital gain or a part of it is invested in a fund nominated by the central government within six months from the date of transfer of the asset.
INR 50 lakh is the maximum amount that can be invested in the long-term specified asset for a specific period of 3 years. In the event the amount is withdrawn before the time frame of 3 years, the exemption will be revoked in the year that the money has been withdrawn.
Tax Exemption on Investments Above the Fair Market Value
Eligible startups are exempted from the tax levied on investments above their fair market value. These investments include investments made by resident angel investors, family, or funds that are not registered as venture capital funds. Investments made by incubators above fair market value are also exempt from this tax.
Tax Exemption to Individual / Huf on Investment of Long-Term Capital Gain in Equity Shares of Eligible Startups U/S 54 GB
Section 54 GB allows tax exemption from long-term capital gains on the sale of residential property in case these gains are invested in small or medium enterprises as defined under the Micro, Small, and Medium Enterprises Act, 2006.
However, this section has now been amended to include tax exemption on long-term capital gains if the money is invested in eligible startups and such shares are not sold or transferred within 5 years from the date of its acquisition. This exemption helps in boosting investments in startups and promotes their growth and expansion.
Set Off of Carry Forward Losses and Capital Gains Allowed in Case of a Change in the Shareholding Pattern
The government has relaxed the restriction of holding 51% of voting rights under section 79 in the case of eligible startups. The carry forward of losses is allowed if all the shareholders carrying voting power held the shares on the last day of the year in which the loss was incurred continue to hold the shares on the last day of the previous year in which the loss is to be carried forward.
The Startup India Campaign announced by the Indian Government has also received considerable push and support through policy changes and introducing schemes that ensure the growth and expansion of startups. These tax benefits that are available to eligible startups provide encouragement to new business ideas and promote the economy of the country.
FAQs
What is the benefit of a Startup India Certificate?
The startup India certificate is proof of a startup being recognized by DPIIT. It has multiple advantages such as tax benefits, easier compliance, IPR fast-tracking, etc.
What is the tax exemption for startups?
Under section 80-IAC, startups founded after April 2016 are eligible for a 100% tax rebate on making a profit for three years in a block of seven consecutive year period. Given the condition, their turnover should not exceed more than 25 crores in any financial year from the deduction claimed.
What is the benefit of the startup India initiative?
Some of the common benefits of startup India initiatives are relaxed norms, tax exemption, access to funding, cheap patent cost, easier compliance, IPR fast-tracking, etc.
How to get funds from the government for startup businesses in India?
The Indian government has enabled a number of schemes for startups. In order to get funds from them through the government, one needs to apply tp the respective online portal and get registered as required on the website.
The power of a Human Mind is astonishing. Just by looking at the past few inventions, one can understand, what the human mind is capable of. In the present age, everything is possible with just a simple click, from shopping to dating. It wouldn’t be wrong to say that we are carrying the whole world in our pockets, thanks to technological advancement. One of the biggest contributors to carrying the world in our pockets is Apple Inc.
The world’s biggest technology company that deals with electronics and computer software first started its journey in 1976. It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne.
Till 2011 Steve Jobs was the CEO of the technology giant. Later in that year, after the death of Steve Jobs, Tim Cook took the charge of Apple. These are just basic facts that almost everyone knows about Apple. Let’s come to the point that makes this article interesting.
Regardless of how much money we make, taxes are very painful for all of us. But on the one hand, people like you and me sincerely pay our taxes. On the other side, there are companies like Apple, and Google that evaded their taxes by billions of dollars.
The question is what is this genius tax-evasion strategy and how do they escape the strict laws of governments? Let’s try to understand by using Apple as a case study.
With great powers, comes great responsibility, and so do pay taxes to the government of the country they live in. Apple being the biggest tech company is not an exception. It is bound to pay a large sum of amount to the Government in the form of taxes.
Just like other businesses, Apple is also not that fond of paying billions of bucks in taxes but has no choice but to be responsible to the country. Somehow, Apple used a tactic to avoid paying billions to the Government. Well, the secret is, not so secret. Apple transfers most of its profit to tax haven countries and thus takes advantage of loopholes, the US Government has in its tax-paying system.
“Play by the rules, but be ferocious”– Phil Knight
As part of its tax avoidance strategy, Apple uses its ‘subsidiaries’ in Tax havens. Now, to understand this more deeply, first let’s try with the term, Tax Haven.
True to its name, the term ‘Tax Haven’ is used for all those countries that offer, foreign investors the to pay minimal and sometimes even no taxes for their businesses. This is basically a good scheme for the investors to avoid paying taxes to the actual country the individual or business belongs to. Another attractive part of this ‘heaven’ is that they occasionally offer financial secrecy to the investors.
Some of the top Tax havens are:
Ireland
Netherlands
Switzerland
Panama
Bermuda
The Cayman Islands
Luxembourg
The Tactics Apple Uses For Tax Avoidance
Every time Apple has stated that it has always played by the rules and has paid taxes to the Government as per the laws. In fact, it considers itself the largest taxpayer in the world. This is somewhat true, in 2017, Apple stated that it had paid over $35 billion dollars in the last three years. However, that amount wasn’t able to make even a small dent in the revenue of Cook’s led multinational company. How?
Well, the strategy is to transfer their profit, obtain domestically to Tax Haven countries. Apple uses Ireland and Luxembourg as its ‘Haven’ to get away from paying the lump sum.
Agreement Between Ireland and Apple
Apple has been operating in Cork, Ireland since 1980 for its overseas operations, and they also set up a manufacturing plant in Holyhill, above Cork.
In 1990, when Apple’s market share was crumpling worldwide, they wanted to save money. Apple’s CEO John Sculley signed a deal with the Irish government. In 1990, Apple’s team met with the Irish government and drafted an arrangement for how much tax it paid in the country.
Since then, Apple has been the largest employer in Cork, Ireland, where they had an upper hand. Apple disclosed to the Irish government that the firm is examining its worldwide operations and Apple desires to establish a profit margin on its Irish operations.
Based on the financial data from 1989, Apple showed $751 million dollars in revenue and $270m in net profit per year. Apple also showed that these profits were made mainly through its technology, marketing, and manufacturing.
They told the Irish government that they only manufacture in Ireland. Therefore, they should not be taxed on the other two elements of business: marketing and technology. Apple has been in Ireland for 10 years and if they do not strike a deal, they will go somewhere else.
Apple’s revenue generated from India, Europe, and the Middle East is taxed in Ireland
The Irish government agreed to the deal offered by Apple in 1991 to tax only certain elements of the business. This made Apple’s taxes suddenly drop to 12.5%, compared to the US (21%). All of Apple’s revenue generated from India, Europe, and the Middle East is taxed in Ireland.
But an investigation by the EU revealed that Apple has paid only 1% or 0.5% taxes instead of 12.5%. They also accused the Irish government of collusion with Apple, because Ireland does not want Apple the largest employer in the country to leave Ireland.
Apple’s Strategy of Creating Two Subsidiaries
Apple’s operation strategy before 2017
Apple created two subsidiaries in Ireland, “Apple sales International“to hold rights of Apple intellectual property to sell and under a “cost-sharing agreement” with Apple Inc. to manufacture outside of South and North America named “Apple Operations Europe“. The Head office of these companies is on paper only and they are controlled by board members mainly based in the US.
Now, these two companies yearly only pay for research and development to Apple Inc. in America. By doing this Apple sales International kept all the revenues and profits generated from India, Europe, and the Middle East.
In 2011, According to US Senate, Apple sales International recorded a profit of $22 billion. But under the agreement with the Irish government only $50 million were taxed and it kept decreasing until 2014.
Before 2017, the US tax system doesn’t put taxes on the profit obtained from the multinational company’s foreign subsidiaries unless they are transferred to the parent company as dividends (changed in 2017). Which is, while compared with the foreign country taxes, is way much higher.
There is a term called ‘Deferred Tax’, which means the income tax that a company will pay in the near future instead of paying immediately, which might be a big shock to the bank balance.
Apple has taken that advantage by transferring over 70% of its domestically obtained profit to the tax haven, thus putting those profits in the deferred tax category of the company.
As per a report from 2017, Apple was avoiding paying almost $78 billion dollars of taxes at that. In Ireland, Apple had three subsidiaries, which played a significant role in the game of Tax Avoidance.
Unfortunately, this game has not been a smooth ride for the technology giant. It has to face some consequences for its tax avoidance strategy.
In 2013 an investigation revealed that two of the subsidiaries of Apple in Ireland are formed in a way that has helped them in avoiding paying taxes to both the country, U.S. and Ireland.
On 29 August 2016 European Commission declared that Apple has used Ireland, and had received illegal tax benefits from the country.
The European Commission instructs Apple to pay almost $15 billion dollars along with interest to Ireland for not confiding with the rules and not paying proper taxes.
The Irish Government took the side of the tech giant and stated that no tax law has been violated.
In the month of November of the same year, Tim Cook appealed against the instruction.
In 2018, Apple paid around €14.3 billion in back taxes and interest that was due to Ireland. The money was held in an Escrow fund.
Present Condition of Apple and Taxes
After a long battle with the European Commission, in July 2020, the European General Court gave a decision in favor of Apple and the Irish Government.
This automatically became good news for the Technology giant as it does not have to pay a huge amount. At present, the European Commission has decided to appeal again, and this time in front of the highest court, the Court of Justice of the European Union (CJEU).
Conclusion
The bigger the business, the bigger will be the risk. Apple Inc. is not an exception here. As stated before, the human mind is amazing. Companies like Apple will always find a way to deal with complicated matters in legal and sharp ways.
FAQ
What is the revenue of Apple?
As of 2022, Apple has reported its revenue in the USA was 99.8 billion U.S. dollars. While global revenue reported by Apple was 365.82 billion U.S. dollars in 2022.
Who Is The CEO Of Apple?
Since August 2011, Tim Cook is the CEO of Apple.
Which is the best Tax Haven?
Cayman Island is considered the best country as Tax Haven.
Initial media announcements declared that the rate of TDS on Virtual Digital Assets (VDA) has decreased to 0.1 percent. However, in a late evening circular, the government debunked prior reports. They illustrated that the rate of TDS on Virtual Digital Assets will remain to be 1 percent. This will be applicable from July 1, 2022.
Tax Deducted at Source or TDS is a method to acquire tax on revenue, asset deals, or dividends. According to the Income Tax Act, an individual making a payment has to pay TDS if the payment exceeds a certain limit. TDS is regulated by the Central Board of Direct Taxes (CDBT). This falls under the Department of Revenue.
Government Plans on TDS
CBDT on Wednesday stated that the TDS on virtual digital assets will continue to be 1 percent. This was clarified when some media reports stated that the TDS rate on VDAs has dropped to 0.1 percent.
“Some media reports have come to the notice of CBDT claiming that the rate of TDS on Virtual Digital Assets(VDA) has been reduced to 0.1%. It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%,” read the official clarification.
Some media reports have come to the notice of CBDT claiming that the rate of TDS on Virtual Digital Assets(VDA) has been reduced to 0.1%. It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%.@FinMinIndia
The government had regulated a 30 percent tax deduction on the gains of crypto assets. With guidance from organizations (the World Bank and IMF) and stakeholders, the centre will shortly conclude a conference paper on cryptocurrencies, Economic Affairs Secretary Ajay Seth said last month.
What Does the Law on TDS on VDA, Crypto Say?
On June 22, 2022, it was issued that TDS on Virtual Digital Assets and cryptocurrencies will continue to be 1 percent. As per section 194S of the Income-tax Act, any VDA buyer is obliged to deduct 1 percent of the amount paid to the seller (resident Indian).
Moreover, the tax rate will be higher in the absence of the PAN. Adhering to the non-availability of the PAN, the tax imposed on VDA (at the time of transfer) will be 20 percent. Besides, if a person has not filed their income tax return, the TDS will be deducted at a 5 percent rate.
When Will TDS on VDA, and Crypto Be Applicable?
As per CBDT reports, TDS on Virtual Digital Assets and Cryptocurrencies will be applicable if:
The sum paid on a single or aggregate basis by the specified person (buyer) crosses 50,000 INR during the financial year; or
The sum paid on a single or aggregate basis by anyone other than the specified person (any other buyer) crosses 10,000 INR during the financial year.
Who is a ‘Specified Person’?
An individual or HUF (Hindu Undivided Family) who does not have any income under the head ‘profit and gains from business and profession’
An individual or HUF having income under the head ‘profit and gains from business and profession’ whose total sales/gross receipts/turnover from business does not exceed Rs 1 crore – or in case of the profession does not exceed Rs 50 lakh.
Wadhwa says, “An individual (not having income from business and profession) will be required to deduct tax at the time of buying VDA, crypto if the payment exceeds Rs 50,000. An individual (having income from the business profession) will be required to deduct TDS if the turnover of business or profession in the previous financial year exceeds Rs 1 crore or Rs 50 lakh respectively.”
“The tax will be deducted if the payment made at the time of buying VDA exceeds Rs 50,000. Any other person (for example Company) will deduct TDS at the time of buying VDA, crypto if the payment exceeds Rs 10,000.”
NOTE: The tax has to be paid after deducting GST and other charges. Sunil Badala, Partner and Head, Financial Services, Tax, KPMG in India says, “It has been clarified that where tax is deducted under the VDA provisions no tax shall be required to be deducted considering the provisions regarding the purchase of goods (without getting into the aspect whether VDAs are goods or not). The tax is to be deducted only on the net amount excluding the charges and GST.”
Who Has to Pay TDS?
After July 1, any individual who purchases a Virtual Digital Asset, such as a non-fungible token (NFT) – or any other cryptocurrency has to pay 1 percent TDS.
“The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income-tax thereon,” read the circular by CBDT.
The law applies to non-resident Indians (NRIs) as well. If they purchase VDAs from an Indian, they are required to pay 1% TDS. However, if an NRI buys through another NRI, they need not pay the tax.
Role of Third Party
The role of a third party would be to deliver a declaration (in Form No. 26 QF) once every three months. They need to provide the declaration for all trades of the quarter on or before the expected date (according to the income-tax regulations).
The Exchange would also be needed to provide its income tax return. All of these transactions must be incorporated in such returns. If these requirements are catered to, the buyer will not be pressed against any charges under section 201 of the Act for these agreements.
What if the Payment is Made in Kind or by Exchanging Two VDAs?
If a person makes the payment in kind (by providing certain services), they still need to pay 1% TDS. Further, if they pay through an exchange of VDA, the tax will still be deducted. For instance, ‘X’ buys Ethereum from ‘Y’ in exchange for Bitcoin. Likewise, the tax will be deducted by both ‘X’ and ‘Y’. Both the parties need to pay their respective taxes.
Conclusion
Virtual Digital Assets have achieved enormous popularity in current times. Accordingly, the volumes of trading in cryptos and digital assets have elevated significantly. The Central Board of Direct Taxes (CBDT) handed out comprehensive guidelines on TDS for cryptocurrencies and Virtual Digital Assets. The tax rate continues to be 1 percent, applicable onwards July 1st, 2022.
FAQs
How TDS will be deducted on cryptocurrency?
1% TDS is applicable on payments toward cryptocurrencies beyond Rs 10,000 in a financial year.
Is TDS applicable to assets?
Yes, TDS is applicable to any earnings made by your fixed assets.
Money has always been the prime driving factor of any economy since human settlements started to be sophisticated. From the barter system to the current complicated transactions, the value of services and objects has always been a determining factor. And this value is satisfied today largely through the use of money.
As our economy goes through its highs and lows, it is inevitable that people get confused as to whether they should spend money or save money. This is also because of the fact that there is an unending cycle caused due to the necessity to save money to buy services and to spend money to buy services.
We have always been taught to save money as much as we can. The more we save and the less we spend, the better will be the financial security and stability of our economy. This is something that is constantly fed on to us.
However, Economists across the world have a different opinion in this regard. They say that consumers should strike a balance between spending and saving. It will be harmful either for the individual or the economy if this balance goes off.
Why you should spend money to Support the Economy?
GDP of India
As far as the economy is concerned, consumer spending is a very important thing to keep it stable and better. Had the rich people of the past and present decided to save their money in their closet without spending it, there would have been absolutely no progress in the economy.
The national economy improves only when there is a healthy flow of money through all units of transactions. This is because when you make any kind of large purchase like a house, car or shop; it creates a ripple effect in the economy. It will start to benefit the people associated with the industry and the other local businesses. This is due to the circular flow of money in the economy. Your spending will become another person’s income and vice versa.
Lack of consumer spending can even lead to an economic slowdown. This happens because of the before-mentioned ripple effect. When money doesn’t flow, companies will be unable to reach their profit margins, there will be losses, it will in turn affect the incentives and salaries of the employees which will further affect the people who are dependent on them. Like drivers, house helpers, street vendors etc.
When that happens, the purchasing power of people is affected which will adversely impact the supply-demand nuances of an economy. It can even lead to a recession when left unchecked.
Spending also does not mean that you should use up all your money. It should be in ways that will benefit you immediately or in the longer run. It should first satisfy all your needs. When it comes to wants, you need to analyse what all you actually have to spend for and take a decision that best suits your conscience.
Things to know before you spend to Support the Economy
Check your surroundings
The fact that you should spend money does not mean that you should do it blindly. There are a lot of things that you need to consider before that. The spending capacity of every person varies, and it is based on this capacity that one should control their spending.
Career and Spending
The first thing that one needs to look for is the general employment condition. Analyse if the job you are in at the moment is stable, is it in demand, are there any chances of layoffs etc. Apart from that, analyse the growth of your company as well. If it is expanding over the years, then it is a positive sign.
You need to have a backup plan if there are any chances for unprecedented repercussions. For example, uncertainty is more if your company depends on something external for their expansion like weather, any particular raw material etc.
Family Planning
Your spending should also depend on the nature of your family. Have a thorough analysis of the future plans of your family, your health conditions and also your parent’s plans. Your spending pattern will vary depending on whether you and your partner are planning to have any children, expecting any large repairs on your assets, potential health issues, or retirement plans of your parents, among other things.
Why you should save and invest money to Support the Economy?
While we talk about the importance of spending to boost the economy. Let’s not forget that all kinds of spending are not the same. It should have a long-term reciprocal benefit as well. A logical analysis of the economy shows that the route to improved productivity of a nation lies in the improvement of capital goods.
This can be done only when you save your money and invest it in productive activities. However, be mindful that saving is totally different from hoarding. This is the reason why it was said earlier that one needs to strike a balance between spending and saving.
Saving does not mean dormancy of your money. It simply means that it is entrusted with productive activities that will subsequently improve the economy, unlike hoarding.
Things to Know about Savings
People tend to inherently have an attitude to save money due to the constant reinforcement we have had about financial management. However, everybody needs to know about certain nuances and advantages of savings and how they will impact the economy.
Safe haven
If you have good savings means you are better protected against debt. You can cover your unexpected expenses without taking a loan. It is indeed a great relief considering the repercussions that a thoughtless loan can have. Along the same line, it will help you control your living expenses and thereby finish your loans as soon as possible. This means that your ability to recover during an economic hardship is higher and that will further improve the chances of recovery of the economy. It also means that you are better protected when you are living on your own means.
Savings are not without any risks. Depending on the condition of your nation’s economy the value of your savings can increase, remain constant or depreciate. People who save and invest will have to pay a huge price if the economy goes through a recession. So brace yourselves for uncertainties and losses while you save as well.
Knowing the Difference
The balance that we need to have between spending and saving is the most important discipline that we need to follow to support the economy. To spend does not mean that you should use your money to buy all the things you want.
Neither does that mean that you should donate everything you get. You should be able to analyse your needs and wants. Have a critical approach to decide on which all of your ‘wants’ should you address after satisfying your needs.
This critical approach goes for saving as well. Saving all your money in your drawer does not help you or the economy. For your savings to improve, you need to channelise them in the right direction. Make sure that they are productive activities and will positively influence your savings. It is also important to remember that savings do not equate with hoarding.
Conclusion
As responsible citizens, we need to be mindful of the options we have with regard to supporting our economy. At the end of the day, a healthy and expanding economy will be beneficial to each one of us. When you spend, make sure to do it in a way that is most useful to most people around you. And while saving too, make sure that it improves over time. Let’s all do our part to help our nation prosper.
FAQs
How does spending increase economic growth?
Higher government spending will also have an impact on the supply-side of the economy – depending on which area of government spending is increased.
How do you build a strong economy?
Keeping Manufacturing Units in the Country and reducing the cost of borrowing and increasing consumer spending and investment can help in building a strong economy.
Is saving bad for economy?
A rising personal saving rate can temporarily slow economic activity, assuming no other changes to income.
Article to be attributed to Mr. Sanjay Dangi, Director – Authum Investment and Infrastructure Ltd., & Financial investor to many startups.
Lately I have been reading about Pigovian taxes – the idea that carefully designed taxes can have an impact on people’s behavior. These are often sin taxes – pricing bad behavior (like smoking or gambling) out of the market making the overall social cost very high. Thinking about it, I make 10 tax proposals for next year’s budget here. I know that it’s a far-off thing and you are still recovering from the breathless media coverage of the budget presented in February. But a budget takes a lot of planning, and I want to get my ideas in early.
Fat and sugar taxes aim to make a society healthier by taxing fatty and sugary foods extra. They have been tried in many countries with various levels of success. In India, Kerala has been the first (and so far, only) state to introduce such a tax, at 14.5%. With some studies showing obesity and diabetes rising in India, it is time to introduce this tax countrywide. Weaning people off excessive fried foods will not only reduce medical bills, but also save foreign exchange on imported palm oil (prices of which have skyrocketed this year). Ditto for sugary drinks and festival sweets.
Doubling GST on Loudspeakers
Recently there has been a lot of noise pollution about the noise pollution caused by loudspeakers. But we Indians love our noise – from deafening DJs at weddings to raucous processions. Banning loudspeakers will only put additional burdens on the overworked police. I instead propose that the 28% GST and 40.8% customs duty on loudspeakers be doubled – or even raised to 100%. The extra money can be used to hire more police, making our streets safer.
3 AM on our roads attracts a certain class of idiot – who either on his baap ka paisa or on udhar, buys a premium bike for racing and doing stunts. Somehow, they think that waking everybody up will impress girls. A Hayabusa will cost them more than a kidney, while a perfectly useful bike like a CD100 is beneath their contempt. A 30% tax will probably not deter them, but might pay for the government to install sound barriers on major roads.
A 10% Suit and Tie Tax
In 2009, Bangladesh banned suits and ties. They are ridiculously unsuitable for tropical weather like ours. People who wear them have to keep the AC on all day, and pour liters of deodorant on themselves. Both increase our petroleum import bill. To make matters worse, most of these are ill-fitted to our paunches as well. A 10% tax will curb the wearing of these suits, and offices can spend less on electricity. Those who do pay the tax will contribute to paying our oil import bills.
A 20% Congestion Taxes
American cities have been built around the car – with wide roads and ample parking. European and Asian cities, many of which are centuries old, were built around pedestrians with narrow streets and congested buildings. With greater prosperity, Indians have filled their cities with cars, so even the smallest towns today have traffic jams.
Many European cities have imposed congestion taxes and generally succeeded in freeing up the roads. We need to reclaim our cities for our communities and make travel easier for all. Congestion taxes also help pay for public transport – which we need a lot more of.
A 100% Great Indian Wedding Tax
Mehndi, sangeet, phere, reception, bidaai and countless other wedding-related functions keep our people away from workplaces for several days at a time. They also cause families to ratchet up huge expenses, often going into debt. This is simply because of peer pressure and keeping up with the Joneses.
I propose a 100% tax on weddings that exceed INR 1 lakh in expenses. Those who can’t afford them will have simpler weddings which are good for us all. Those who can pay for them will enrich public coffers. Many states have schemes to help poor women get married, and these taxes can help fund those schemes.
A 20% Glass Building Tax
Studies have shown that buildings with glass facades increase local heat and are contributing to climate change. The sun’s heat is reflected off the glass, so the building itself is not heated. But on a street full of buildings like these, the heat is trapped on the street, making a summer day unnecessarily hotter. These buildings also need to be air-conditioned because of the lack of ventilation, which causes a huge increase in their carbon footprint. Lastly – and this is my subjective opinion – these buildings are ugly.
A tax proportionate to their carbon footprint will make sure that the government has money to pay for offset measures. It can also help fund architectural research into alternatives that are more aesthetic and sustainable.
A 100% Fairness Cream Tax
I would daresay this is self-explanatory. Our daughters should not be hurting themselves because boys have been taught to expect gori-chitti brides.
A 28% Dog-walking Tax
More than dogs today, dog-walkers have become a status symbol. What productive employment this gives to young men and women, I have no idea. I propose that dog-walking be brought under GST at 28%, in the hope that it will make people walk their dogs themselves and thus get some exercise.
A 15% Adjournment Tax
Tareekh pe tareekh is how most people will describe our justice system. Here’s a small idea that may help to reduce the 44 million pending cases in India. Every time a lawyer asks for an adjournment, they must pay a tax on their fees, that they cannot pass on to their clients. Judges may waive the tax if they feel the adjournment requested is legitimate. This might incentivize both bar and bench to wrap up cases quickly – and help pay for hiring more judges in our understaffed courts.
Conclusion
Will taxation solve all the above problems? Not by itself. Daru-cigarette taxes have been around for decades – and work only partially. Governments have learned through multiple experiments that outright prohibition only cause people to buy tobacco and alcohol illegally – often causing ‘hooch tragedies’. However, such ‘bad behavior’ taxes are a more democratic way of bringing social change in a country that bans things at the drop of a hat, or enacts draconian laws that often backfire. Taxes preserve people’s ability to choose – even if it is bad for them. They make things look bad, but don’t criminalize the people who do these things. True social changes need public awareness and participation – and such taxes can help fund these campaigns.
There’s another benefit – both state and union governments can wean themselves off fuel taxes and give some relief to the common man. This is at a time when oil is taking a keen interest in USD 200 per barrel, and the public is looking for some relief from inflation.
A Chartered Accountant can guide you not only to prepare your taxes and other regulatory standards but at multiple levels of business formation. Their knowledge of key corporate areas such as laws, accounting and taxation, contracts, and so on can be invaluable when strategizing, applying for bank loans, maintaining accounts, installing software, determining subsidies, and so on.
As a result, discussing with a CA while strategizing a startup can be extremely useful as it enables one to gain insight on key issues early on instead of being stuck later. CA professionals in India can assist you in developing the ideal accounting framework for your business.
A CA can forecast fiscal estimates based on analyzing the industry for a similar item and the government’s tax regime due to his/her knowledge and experience. They can use the key players and in-depth insights to assist their customers in increasing their profitability from the start.
Corporate Formation and Legislative Framework
There are numerous forms of registration, such as corporate entities, LLPs, or businesses, as well as sole traders or proprietorships. Each is governed by a separate law. Registration is subject to various regulatory laws, ensuring compliance, and tax rules, which a CA can effortlessly explain and help you determine what is the right approach for your business.
You must register your business with the Companies registry as a component of the startup authorization phase if it’s a Private Ltd. or LLP or simply a partnership. Filling out forms and giving details to the Ministry of Corporate Affairs to initiate your business legally is also part of the startup registration. As a result, a CA or a virtual CA is the ideal advisor to assist you with the registration.
Furthermore, if you’re starting a Private Ltd. Firm, you’ll need documents like the MOA or AOA, and if you’re starting a partnership or LLP, you’ll need the Alliance deed. CA can create such documents skillfully.
Accounting and Financial Assistance
To fill out the necessary paperwork and register the firm, a startup involves careful accounting and financial assistance. As a result, a CA can assist you in managing your firm’s stock holdings, cash flows, forecasts, and financial records.
The CA is necessary for startups that want to enroll as a Private Ltd. Firm. They will assist and will also record all of your stock ownership info and money transfers as needed for a Private Ltd. Firm.
Aid You in Obtaining Finance or an Overdraft
Realizing that a CA is in charge of your paperwork and loan approval process improves your probability of gaining credit. They will be aware of all aspects your bank may have about income and expenses forecasts and can help you choose the right loan and rate of interest.
How Can a CA Help Your Firm Sustain Itself?
When a startup begins to hire, a CA is essential. As a manager, you could begin with as few as 1 or 2 staff. However, it is vital that you adhere to all tax regimes for your teams, such as TDS, Labor Regulations, and Salary Clauses.
A CA can be your ultimate source, helping you comprehend salary payable modes for your staff, as well as the dos and don’ts of declaring payouts to lawfully save taxable income.
They can also help you with the company’s income estimates, predicted financial statements, or project reviews that you might need when filing agreements or applying for finances. Thus, in today’s technologically advanced world, taxation and laws governing business operations are critical and must be strictly adhered to. It is critical that you document standard tax returns by the Ita. As a result, a CA can assist you with a variety of compliances and filings.
As your company expands, so will your accounting books. It is critical to adhere to classic financial reporting to keep all card payment systems intact. A CA will provide you with proper guidance and handle your acct book following the required standards.
Furthermore, as your firm grows, you will be bound to keep track of your records for filing with the IRS and yearly reporting with the company’s registry. If your company’s attrition reaches a certain limit, you will undoubtedly require the services of an accredited auditor to report your ITR returns & conduct tax audits.
Another required conformance filing is a process that must be abided by all businesses, large and small. It is also vital to comprehend your financials, which is primarily the responsibility of a CA. As a result, it is critical that you select the ideal CA from the ranked CAs in India for your firm to profit and work efficiently.
Should You Hire a CA?
Good counselling and advice define the progress of a startup from conception to verification, whether your firm is registered or not. After investing heavily, it is critical to managing your book of accounts for your firm to thrive. Thus, as your firm progresses ever since its registration and onset, a skilled CA will not only deliver you proper accounting records of your firm but will also assist you in understanding the stock ownership and investment structure in your firm.
A decent virtual CA, accessible 24/7, is needed to inform you through all levels, be it paying the due taxes as per Income Tax rules or rescuing the firm from any undesired taxes. A CA can assist you in understanding all other statutes’ rules, statutory provisions, your firm’s policies, and work history.
You can also hire a virtual CA. While there are many virtual CAs, it is critical to pick the suitable one. Because CAs oversee critical parts of your business, it is always advisable to hire the best online chartered accountants. Having several CAs can wreak havoc on your books.
Although you may pick the finest from the shortlist CAs in India, it’s a good idea to pick virtual CAs who are available 24/7 and are also cost-effective. As a result, hire a CA from the first day you intend to register your official company to the day you put your vision into action.
Chartered accountants entities can also assist you with complex tax provisions that, if overlooked, can result in significant penalties. They will also portray your lawsuit in front of tax officials and courts at your behest. They can provide you with any information you require regarding such formalities.
Furthermore, they help you in a variety of business areas such as obtaining a digital signature, guiding you during an official review of your firm, alerting you before any disparity is discovered by the assessor or tax supervisor, govt grants and sanctions, and so on.
In conclusion, a CA can help your brand prosper, so consulting with a CA is a must in the long run.
FAQs
How can a CA help in business?
A CA can help you reduce taxes, manage your finances, prepare a business plan, and can help you connect with other established businessmen.
What is the role of CA in a startup?
A CA helps a firm to increase its profits and assists the firm in registration and filing taxes while the founder focuses on the important aspects of the business.
31st March has just passed. Was the last month of the gone financial year full of a hassle for you? Do your last-minute tax-saving plans always lead you to invest in the wrong instruments? Well, if your answer is yes, you are at the right place. In this blog, we have brought you tips on how to organize your personal finance in the new financial year.
A book named “Personal Finance” written by E. Thomas Garman and Raymond Forgue defines Personal Finance as the study of resources, both personal and family, that can be considered important from a financial perspective. It involves spending, saving, protection, and investment of these financial resources.
Financial freedom is available for those who learn about it and work for it. – Robert Kiyosaki
Key Aspects of Personal Finance
The reason most people fail in making a successful financial plan is a lack of awareness. Although people make a lot of effort while managing their finances, they often overlook important areas. In this section, we will discuss the 5 key aspects of Personal Finance.
Saving
Warren Buffet has said “Do not save what is left after spending, but spend what is left after saving. This is indeed a great piece of advice. You cannot predict when the financial crisis will hit you. Therefore, it is better to remain prepared.
Savings help you to keep calm in such situations and look for a solution. As per experts, your optimum savings should be equal to your six months expenses.
Earlier, the most preferred option for savings was a “Saving account”. However, recently a lot of people are moving towards debt instruments such as liquid funds for saving.
There are a number of reasons for this shift. Foremost, Liquid funds have minimal credit and interest risks attached. Further, you can easily withdraw money in small time. Also, though there is no guarantee, these funds provide you with better returns than your savings account.
Investing
Investing
As Benjamin Graham said, “Successful investing is about managing risk, not avoiding it”. Many people confuse saving and investing to be the same. Well, they are not.
While investing, you are actually using your money to make more money. There are plenty of investment options available in the market such as mutual funds, real estate, stock market, etc.
To choose the correct investment options organize them into short, long, and mid-term goals. The option best suited for your requirement, horizon, and time frame should be chosen.
Financial Protection
As per WHO, financial protection is the heart of Universal Health Coverage (UHC). If chosen well, it gives a safety net to you and your loved ones. The key is to ascertain prepayment and pooling of resources to save you from financial hardship.
Financial protection ensures that these impromptu situations do not hamper your savings and investment plans. Insurance is classic financial protection. Basically, four types of insurance plans are considered mandatory for an individual. They are Term insurance, Health insurance, Mortgage Protection, and Personal accident insurance.
Tax Plan
Tax Planning
You can save your tax by identifying the right kinds of investments and purchases. In India, there are almost 70 exemptions and deductions that can be used to lower your taxable income.
Section 80C and 80D of the Income Tax act may help you save a lot on your income. Under Section 80C, you can reduce your taxable income by investing in certain tax-saving instruments such as EPF, PPF, NPS, NSC, etc.
On the other hand, Section 80D allows you to save tax on the money you pay as a premium for the health insurance of you and your family.
Retirement Plan
“Planning for retirement is not something we can put off until a later date. The time to plan is now.” Here Bob Reid has correctly described the need for a retirement plan.
Unless you are planning to become a liability to your kids, you should start planning for your retirement now. This is actually because you never know when you will stop working.
The greater life expectancy and frequent inflations have further enhanced the need for a retirement plan. Investing in sources of steady income can be the best option. Life insurance annuity, rental income, and mutual funds are good options to consider for your retirement plan.
How to Organize Your Personal Finance in the New Financial Year?
Now that we know the key aspects, we are ready to organize our personal finance. We have listed tips to help you organize your personal finance in the new financial year.
1. Start Early
“Haste makes Waste”. If you have tried to plan your finances and investment in the last month of the financial year, you can certainly relate to this statement. During the last-minute rush, not just you but investors are also impatient. Thus, there are maximum chances of making a wrong decision. Therefore, it is better not to wait for March to plan your finances. Starting early helps you to make calculated decisions. Put your financial plan in place in the month of April itself.
If you wish to invest in PPF or SIPs in your equity-linked saving schemes (ELSS funds), better start at the beginning of the new financial year.
2. Plan your Budget
Living within your means is important. Plan your expenditure and savings for the next year in the beginning. Go through your previous year’s income and expenses to make the right decision.
Set your financial goals and decide your cash flow accordingly. If you have received a good bonus, try to prepay your loans, at least partially. Our income and aspirations play a major role in deciding our financial plan.
This would help you to identify your spending. So, you can strike the right balance between spending and savings. If cutting down your expenditure is not an option, try using smart spending means such as loyalty programs, credit cards, or some apps.
Try competing with your previous month’s budget. It would help you grow as a smart spender. Try setting goals and make efforts to reach them.
3. Create an Emergency fund
This is the fund that will help you take care of the unexpected expenses in “just-in-case” situations. Usually, financial experts advise keeping 20% of your every paycheck in this fund.
As per Forbes, you can create an emergency fund by simply following a few steps. They are:
Setting up a target date to start your fund.
Reallocating some amount from existing assets.
Drawing a monthly commitment.
Creating a separate account for gathering.
Channelize extra income towards this fund.
4. Determine your insurance needs
Determine Your Insurance Needs
Insurance is not only meant to save tax, rather it is a means to serve critical needs. The beginning of the new financial year is a good time to determine if you have adequate insurance coverage.
The finance experts believe that your insurance cover must be 10 times your annual income. Also, reviewing your insurance needs as per your changing life goals is important for example, if you are planning to get married, have a child, or buy a house.
As per a Swiss report, people in India are awfully uninsured. The protection gap is almost 83% wide. This means that if the Rs 100 insurance cover is needed only Rs 17 are spent by the policyholders.
To evaluate the adequacy of your insurance cover you can also use Human Life Value (HLV) tools. These tools are available online and help you assess your financial requirements based on your liabilities, increments, earning capabilities, and your age.
5. Review your investment portfolio
It is always a great idea to review your investment portfolio at the beginning of the new financial year. Track the market performance of your existing assets to understand how it has changed since last year.
Readjusting your investment strategy is especially important if you have experienced any major life changes in the last year. For example, if you are nearing retirement, you may want to invest in a good retirement plan. Evaluate your needs and invest accordingly.
6. Plan to spend your annual bonus
If you have received an annual bonus do not let the money get fritter away. Plan your spending well. For example, if you have a loan you can partially or completely prepay it. Or if you have a child try spending the bonus on good Children’s plan.
Even if you have no such liability, this does not mean you can just cross your budget and waste that money. Try channelizing it towards your savings or emergency fund. This will help you meet your financial goals.
7. Plan your taxes
Planning your taxes at the beginning is a great way to start your new financial year. It is actually a part of the financial discipline. To initiate tax planning, you first need to identify your tax slab. The tax rates are different for different levels of income. If you know your tax slab, you can easily calculate your tax outgo. This will help you to figure out your tax-saving requirement.
To analyze the scope for reduction, first, evaluate your existing tax-saving investments. This is crucial as there is a maximum limit for reducing the tax outflow.
A number of tax-saving instruments are available to choose from such as PPF, NPS, tax-saving mutual funds, etc. It is also important to distribute your tax investment across the year instead of doing it in the last month. However, it is equally important to understand that investment goals must be derived from your financial goals and not for the purpose of tax savings.
8. Limit your debts
It sounds easier said than done. Anyways who wants to remain in debt? It just happens. However, as per Central Bank, there are certain strategies to keep your debts in check. They are:
Do not buy anything which you cannot afford without a credit card.
Completely pay off your credit card balance, every month.
Focus on your needs not wants.
Plan your budget as per your financial goals and requirements.
Limit the number of cards you own.
Maintain a master sheet to track your expenses.
9. Monitor your credit score
It is almost impossible to not own a credit card in today’s world. However, it is crucial to managing your credits correctly. A solid credit report is required if you are planning to obtain a loan or mortgage a property. For this, you better pay off your balance every month or at least try to keep a minimal credit utilization ratio.
The most popular credit score these days is FICO (Fair Isaac Corporation) score. The factors that determine your FICO score include payment history (35%), length of credit history (15%), amounts owed (30%), credit mix (10%), and new credit (10%).
It is also a good idea to subscribe to credit agencies that provide you with regular updates on your credit score. This would not just help you in identifying mistakes but, also to detect any fraudulent activity.
10. Maintain financial records
It is always important to keep your financial records organized. This will help you track any discrepancies at later stages. Traditionally, a folder or drawer is used to keep all your bill and payment receipts. However, this increases the risk of missing or forgetting one or more of them.
Currently, a number of apps are available to keep track of your finances. These online services help you separate the old bills and receipts from the new ones. Also, you can set reminders for upcoming payments. This saves you from the hassle of looking through every document in your folder while trying to find one.
Conclusion
Therefore, it is important to understand the five key aspects of personal finance i.e. savings, investment, financial protection, tax plan, and retirement plan before you start to plan. Moreover, organizing your personal finance in the new financial year using the tips mentioned above would certainly help you get more out of your available assets.
Hope you enjoyed reading this article and learned something. Keep visiting for more fun and knowledge.
FAQs
How do I write a financial plan for the new year?
Start early, create an emergency fund, plan your taxes, and monitor your credit score.
Which financial plan should be set first?
Creating an emergency fund should be your priority because you never know when a crisis will hit you and you’ll be buried under debts.
What is the 50 30 20 budget rule?
According to the 50 30 20 budget rule, you should allocate 50% of your income to needs, 30% to spending, and 20% to savings.
The majority of people in this country, as well as in any other country, earn money through regular jobs that pay hourly wages or regular paychecks. Distinct countries have different laws, yet they all have the same basic structure. The wealthy find a means to avoid paying them. Despite the fact that ordinary individuals are taxed, data show that the vast majority of millionaires and billionaires either do not pay any taxes or pay very little.
People with regular jobs in the United States are taxed at rates ranging from 10% to 37%. Regular wage earners in India are taxed at rates ranging from 0% to 30%. This, however, does not apply to the rich. But how do they manage to pay nearly nothing and avoid facing legal action?
Despite the fact that regulations are in place to make high earners pay more taxes in proportion to their income, the exceedingly wealthy are always exempt. In this article, we’ll look at what the wealthy and their lawyers do to avoid paying high taxes.
Rich people do not keep their money in banks or make it readily accessible. They manage their wealth in a unique way compared to regular people. They invest their money in stocks or real estate, which are not taxed until they are sold.
As a result, the wealthy keep getting richer as their assets appreciate in value, but they do not pay taxes on them. For example, Jeff Bezos, the former CEO of Amazon, pays nearly no taxes because the majority of his wealth is invested in Amazon stocks, which are not taxed until he sells them.
2. Living Off Loans To Avoid Taxes
Borrowed money is not taxable because it is not considered income. And the wealthy take advantage of it. They use their stock shares to obtain large loans from banks and use them to fund their lifestyles because selling the equities would result in paying taxes on them. Elon Musk, the CEO of Tesla, for example, takes out loans with his stock as collateral. That’s how he keeps his lifestyle, and because the money he borrows cannot be taxed, Elon avoids paying taxes.
3. Charity And Donations
Many wealthy people believe in giving back to the community and donating large sums of money, but not all of them have the greatest interests at heart. Most of them do it just to avoid paying taxes. Conservation easements are one way the wealthy have exploited the tax.
Most of the tax paid by rich people might be recovered when they give to charity. When they choose to give away their earnings to charities, they can practically avoid paying tax at all.
4. Lawyers To Avoid Paying Taxes
Wealthy people hire lawyers who specialise in avoiding high taxes and preserving their assets. These lawyers take a gigantic cut, but they make certain that their clients don’t lose money in taxes.
Rich people use their influence and ties to push for measures that exclude them from paying taxes. They bribe legislators and maintain strong connections with them so that they can later use them to avoid paying taxes. Tax lawyers assist their clients since they are familiar with the tax rules and can readily uncover loopholes to save money for their clients.
5. Stepped-Up Basis Loophole
Most regular people are unaware of the world’s largest tax loophole, known as stepped-up basis. This is how the family’s riches stay in the family and taxes are avoided. For those who are unaware, this means that when stocks are passed on to an heir after death, the successor will only pay tax on the profit earned after they inherited the stock. As a result, there is no tax on earlier gains, which is how wealthy families maintain their wealth.
The rich have found several ways to not pay their taxes properly and save millions and billions of dollars. Many live off loans, and many invest in stocks and other assets that cannot be taxed until sold. Charities and donations are also being used by rich folks to get tax relief.
Rich people also hire tax lawyers to assist them in identifying loopholes in order to avoid paying taxes and save their clients money. Billionaires use their influence and connections to tweak the laws and promote laws that benefit them.
President Biden has proposed several proposals, including the elimination of a stepped-up basis and an increase in the tax rate from 20% to 39.6%, which would apply to people earning more than $1 million USD per year.
FAQs
How do the rich avoid taxes?
Rich people hire lawyers to find loopholes and save taxes. Tax havens are also one of the most popular ways to avoid tax.
What are the tax loopholes for the rich?
Capital Gains Tax is one of the most common loopholes used by the rich.
Nitin Konde
