I work in a startup company where I am paid 80k p.m. salary. Regarding my Income Tax they gave me two options,
1, Pay tax for the whole salary
2, Since I work out of home I use my own money to internet, software payments, official travel etc. They asked me to reduce my salary and show these as company expenses which means I pay lesser tax for lesser salary.
I am planning to take a home loan in near future so I am not sure how this will affect the prospect of me getting a better loan. I am ok with paying the extra tax if it helps me in multiple aspects.
Note: The company is yet to pay the TDS due to some issues and they are planning to pay it with fine. They will be doing it after I give my choice.
Asked 8 months ago in Income Tax from Chennai, Tamil Nadu
For getting More Home Loan Eligibility you have to show more salary in your form 16
For tax saving show as maximum you can show
HRA ,Conveyance Allowance , medical reimbursement, helper allowance
Deductions u/s 80C, 80D
Keeping in view your home loan perspective please go for 80k salary option. For more tax planning to avail maximum loan plz contact me.
I would suggest you to go for lower tax option now and later on when you plan to take loan switch it first option 3-4 months before.
Further, depending upon the nature of your work, you can also work as a retainer and pay tax onlu on 50%. However, this is applicable for certain kind of professionals and not for all.
What is the kind of work you do and what is your qualifications?
There are pros and cons of both these options. If you are planning to take the home loan immediately, you may want to show higher salaries in Form 16 and avail maximum deductions through Sec 80c, 80d, HRA etc. Post all these adjustments I dont foresee your taxes to be aignificant considering the salary of 80k per month.
You can speak to me for efficient tax planning to ensure that your taxes are minimal in a compliant manner.
You can get paid by the company as retainer ship, provided you are working as professional skills. In that case, you wont be liable for Provident fund deduction. However, TDS u/s 194J will be deducted @10% on gross amt paid
Hi. You should First ascertain the amount you wish to raise for buying a residicial property. Once you know the amount, ask your bankers regarding the amount of income you need to maintain, if you ever wish to take up a loan in future. I guess this will solve your query. Do let me know if you have any questions!
As regards loan eligibility is considered, first option would be better as it would let you fetch a higher loan.
However, second option would be beneficial for tax purposes.
You can opt for option 1 for this year till you take a loan and then from next year a salary structure can be framed up.
We may help you with preparing a salary structure to minimise taxes and maximise benefits.
Regarding Home Loan Application appraisal system, generally, what the lenders do is that they assume that approx. 40-50% of the your in-hand salary shall be your domestic expense and the rest they assume can be saved for repayment of home loan obligations viz. EMI/ Interest, etc.
Hence, if you try to reduce your salary by claiming the remaining amount as reimbursement of expenses, your salary sheet will show lesser in-hand amount.
As such, your eligibility for loan applications may reduce proportionately.
i would suggest you to go for full salary as from FY 2018-19,there is a standard deduction of Rs 40000 for Medical and Conveyance. which will help to accommodate official travel, and as far as telephone expense is concerned, you can ask them to design your salary break up of salary in such a way that it gives you telephone expense deduction allowance - it is generally rs 1000 to rs 1500 per month.
Merit of taking higher salary is that
1) you will get higher loan.
2) will help at the time of switch over of Job.
3) once you take home loan - your tax liability will reduce.
1. Pay Tax for the whole salary: This option would be helpful if you treat the contract with the company as an employment contract. The loan disbursal by any bank in the near future will depend upon the amount of salary drawn by you per month basis.
2. In the second option, you have to work with the company not as an employee but on the role of a consultant wherein they will be required to deduct 10% of TDS every month before making the payment to you. In your Income tax return, you may then go for either of the following two options:
- Choose presumptive taxation
- Business/profession income
Under presumptive head, you will be able to save more taxes. Well, the loan disbursement will again depend upon the total income reported by you in the tax return.
Showing the income under the head salary would give better loan prospects as you won't be reducing any income in that case.
If you are planning to avail a home loan then it is better to pay higher taxes since that will increase the quantum of loan you can avail. The normal multiplier is 5 times your post tax income.
You may calculate accordingly.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP