THIS is for the entrepreneur. If you run your own business venture, and you are the proprietor, then you need to pay the tax on your profits. This also includes income from professional services such as that of a practicing doctor, lawyer, consultant and so on.

Maintain proper records
The starting point for people that come under this head of income is to maintain proper books of accounts like a cash book, a receipt book, a journal and so on. The books of accounts must be maintained if the income from the business of profession exceeds Rs 1.5 lakh.

Calculate profits
Then comes the process of arriving at the tax amount. In case of businesses, the tax is calculated on the profit amount and not on your earnings or income. So you must first sum up your total income for the year. You then need to deduct certain expenses and arrive at the profit.

Now you maybe tempted to claim deductions of all kinds of expenses so that you can show a lower profit and hence pay a lower tax. But the tax laws don’t give you any such scope. There is a list of expenses that can be deducted. Anything other than this list cannot be deducted.

• Rent, municipal taxes, repairs and insurance for business premises
• If you are using your own residence for running your business, then proportionate expenses will be deducted.
• Repairs and insurance of machinery and furniture
• Depreciation is allowed in respect of building, machinery, furniture, computers and other assets as specified in the Income Tax Act
• Insurance on health of employees
• Bonus paid to employees
• Interest on loan taken for the purpose of the business or profession
• Contribution made towards provident fund or gratuity fund
• Bad debts
• Entertainment expenditure
• Advertisement expenditure
• Traveling expenses
• For financial agents like an insurance agent and mutual fund agent, an ad-hoc amount of 30% is deducted.

How much tax do I have to pay?
This depends on your income slab. Here are the rates for various slabs.

For men:

Up to Rs 1.5 lakh: Tax free

From Rs 1.5 lakh to Rs 3 lakh: 10%

From Rs 3 lakh to Rs 5 lakh: 20%

Above Rs 5 lakh: 30%

For women:

Up to Rs 1.8 lakh: Tax free

From Rs 1.8 lakh to Rs 3 lakh: 10%

From Rs 3 lakh to Rs 5 lakh: 20%

For senior citizens:

Up to Rs 2.25 lakh: Tax free

From Rs 2.25 lakh to Rs 3 lakh: 10%

From Rs 3 lakh to Rs 5 lakh: 20%

Above Rs 5 lakh: 30%

Photograph: Spencer Platt/Getty images

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