'How Do I Reduce My Tax Burden?'

Do you have income tax-related queries?
Please ask your questions HERE and rediffGURU Yogendra Arora founder of Y Arora Associates And Chartered Accountants, will answer them.

Anonymous: Sir, IT assesses wedding expenses of Rs 15 lakh paid for assessees' daughter's marriage purposes f.y. 2024-25. Query: How much amount tax exemption of wedding expenses it purposes and wedding expenses debited to assess capital account for accounting records purposes.

Wedding expenses incurred for the daughter's marriage are personal in nature and are not exempt from tax.

However, an accounting entry can be made in the capital account to reflect the expense. This will reduce the assessee's capital contribution in the business.

Anonymous: Hey, I am a freelance graphic designer based in Mumbai. I'm 40 and I've recently transitioned from a full-time job to freelancing, and I'm struggling to understand how to manage taxes on my variable income. My annual earnings are Rs 8-15 LPA approx. Are there any deductions specific to freelancers? Also, how should I plan for quarterly tax payments?

For this financial year, you will be taxed under two heads:

• Salary Income: For the period you were employed
• Business Income: For the remaining period as a freelancer

Freelancers do not have specific deductions, but all deductions available to other taxpayers (such as under Sections 80C to 80G) are applicable.

For taxation of your freelance income, maintain proper records of all receipts and work-related expenses (excluding personal expenses) with documentary evidence. Your taxable income will be the net amount after deducting eligible expenses. You may also opt for presumptive taxation under Section 44ADA if applicable.

Advance Tax Payment:

If your total tax liability exceeds Rs 10,000 in a financial year, you must pay advance tax quarterly as follows:

• On or before June 15: Minimum 15% of total tax liability
• On or before September 15: Minimum 45% of total tax liability
• On or before December 15: Minimum 75% of total tax liability
• On or before March 15: 100% of total tax liability

Anonymous: Hi, I'm planning to retire in the next five years and want to ensure my savings are tax-efficient. I am 52, working as a school teacher from Chennai. I've got investments in PPF, mutual funds, and a pension plan, but I'm unsure how withdrawals will be taxed. Should I consider shifting any of my investments to reduce my tax burden in retirement?

Each of your investments has different tax implications:

• Public Provident Fund (PPF): Withdrawals are completely tax-free
• Mutual Funds: Taxation depends on the holding period:
• Short-term capital gains (STCG): If sold within one year, taxed at 15%
• Long-term capital gains (LTCG): If held for over a year, gains above Rs 1 lakh are taxed at 10% (without indexation)

Pension Plan:

• If you are a government employee, the commuted portion (lump sum) of the pension is tax-free.
• The monthly pension received post-retirement is taxable as per your income slab.

Should You Shift Your Investments?

• Investment shifting depends on factors like expected returns and liquidity needs.
• PPF has a fixed interest rate but a contribution limit of Rs 1.5 lakh per year.
• Mutual Funds depend on market performance and can offer better long-term returns.

To optimise your tax efficiency, consider consulting a financial planner before making changes. 

Krishna: I have one adopted minor daughter (my brother's daughter-both parents expired). She attains major in Jan 2028. Some property is on my brother's name. After she becomes major, can she able to sell for her education purpose? Or do we need to take legal heir certificate from court then change the property on her name? Please explain the procedure.

You need to obtain a legal heir certificate from the court and have the child's name updated as the property owner. Only then will she be able to sell the property in the future as per her needs.

Additionally, you must approach the court to appoint yourself as her legal guardian until she reaches majority.

For the detailed procedure, it is advisable to consult a lawyer practicing in the relevant jurisdiction.

Anonymous: Sir, client purchase of property in auction done by a bank at value Rs 2 crore. But the stamp duty value of which is Rs 3 crore. Question: Whether capital gain will be taxed on difference value or is there any way out?

Capital gains tax is applicable at the time of selling the property, not at the time of purchase. There is no capital gains tax on property purchases.

Kanagaraj: Hi sir, I transferred Rs 3 lakh to my friend in 2023 as loan through bank transfer. If he repays that without any interest in 2024, should I work income tax?

If there is no income in a transaction, then there will be no income tax. As in your case, since there is no interest, no income tax will be levied.

• You can ask rediffGURU Yogendra Arora your questions HERE.

Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this QnA or an attempt to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.