Pay Zero Tax – On your white money-Here is the way…

Pay zero tax on your white money is the headline for this article.

You may be surprised by seeing this headline, and you may be thinking that I am joking.

But it is true.

You can pay zero tax on your income completely.

First, let’s understand the different categories of people who are earning money.

There is a four-category type of people who are earning money.

1. Salaried Employees
2. Business People
3. Self Employed
4. Professionals

Read this article that How Cost Inflation Index will help you pay less tax.

Also, read the article, What are the benefits of filing Income Tax returns? Click this link to read.

What is their mindset, and how are they planning to pay zero tax to the government? …

1) Salaried employees mindset in paying taxes…

Employees belonging to the organised sector will have their salary (income) credited into their bank account from their employer.

So, the income tax can easily track their income and salary.

As a result of this, these salaried persons cannot escape paying taxes to the Income Tax Department (government).

In addition, these salaried classes are also not interested in paying taxes.

But they are helpless.

I.e., the reason they are paying taxes.

When it comes to unorganised salaried employees, their income will be, and their salary also doesn’t get credited into their bank account.

As a result of this, they are not paying taxes and not filing an income tax return at all.

So, Salaried do not want to pay taxes but they are paying taxes and they do not have options to escape from paying  the taxes

For organised salaried employees, avoiding taxes from their salary is not easy.

But they will definitely have a chance to have black money (unaccounted money) when they sell a real estate property.

2) Self-employed How they are planning to pay zero tax?…

There is another set of people who are employed.on their own.

These people will not work under any employer.

They will design their job or work and will earn money from it.

Roadside food vendors are an example of self-employed.

I have seen some of these self-employed persons earning money in lakhs per month.

But very few of them will pay low tax, and many of them will not file income tax returns at all.

The reason for this is that their feeling is they will lose their wealth by paying taxes.

As they have this feeling, they will deliberately try to avoid paying taxes.

Their income is not known to the Income Tax Department.

They will accept most of the money from their customers in cash form.

And they will showcase their income to max 30% to 50% in their income tax returns only.

I know a few persons who showcase 10% income only to the Income Tax Department.

Professionals, how they hide their income from the Income Tax Department…

Charted accountants, doctors, and lawyers are called professionals in India.

These people also try to accept as much money in cash form only from their clients or customers.

In addition, these people also showcase their income of 20% to 50% only to their income tax returns.

4) How do business people file their income tax returns? …

A person who is fully involved as a proprietor in a business is called a self-employed person.

Ex… roadside vendors. The vendor is actually doing business.

But as he cannot earn money without spending time, he is called self-employed.

When it comes to a businessman, his presence at the business place is not required.

In addition, someone (his representatives) will run the business.

Business people also try to avoid paying taxes.

In addition, for this purpose, they will showcase high amounts as expenses and will withdraw white money from the banks and make it black money.

So, all the above categories People always try to keep the money as black and do not want to pay taxes.

How do these Four Category People Invest?…

All these will prefer real estate and gold as their primary investments.

As other asset classes like equity, bank FD, etc. demand white money to be invested.

Now let’s learn how these people can maintain white money without making it as black with zero loss (i.e., without tax effect).

I will explain two scenarios for this.

Scenario 1) If you maintain Black Money to pay zero tax?…

Most people will accumulate black money over a period of 3 to 5 years.

In addition, once that amount becomes substantial, they will buy real estate property with a combination of black money and white money.

Sometimes this black and white combination is as high as 30%: 70%.

In the above image, you can see if a person accumulates black money of Rs. 1,00,000 per month for 5 years.

After 5 years, he will have 60 lakh in his hand.

In addition, this money all these 5 years has not gained any return (zero return) as it is not invested.

Scenario) If you pay tax and do not maintain black money and invest?…

In the above image, you can find that if you pay taxes on Rs. 10,00,000 (a 30% tax assuming you are in the 30% tax slab).

In addition, the balance left Rs. 70,000 (white money) per month if invested at a 15% return per annum.

Then you will still have around “60 lakh,” like in Scenario 2).

But the only difference is Scenario 1) 60 lakh is black money in Scenario 2) 60 lakh is white money.

In addition, for simplicity purposes, I have not taken surcharges into consideration for the calculations in the above image.

But where is the possibility for me to get a 15% return if I invest my money? …

BSE-SENSEX

You may have heard on the television and read in the new papers about BSE-Sensex.

In addition, you can see in the above image that the Sensex value has grown to 42,000 from 36,000 in the last year.

Like real estate, the Sensex is also capable of giving returns in the range of 8% to 15% in the long run.

So, it is very clear that by investing white money (after paying full taxes), if you invest in Sensex, you can still create good wealth (60 lakh).

What are the disadvantages of maintaining Black Money?…

• You can invest only in asset classes like real estate, gold, silver, etc.
• In addition, you will not be able to invest in Mutual funds, Bank Fd’s Direct Stocks, and PMS, etc.
• You have to stick to real estate and gold, etc. forever.
• As a result of this, diversification is not possible.
• Your mind knows that you are cheating the nation and its people.
• You have heard that all goods should not be kept in one basket.
• But you can put your money in very few baskets only, like real estate.
• You can argue with me that you can invest in private chits or buy gold for 5 years, and then by liquidating gold and chit, I will buy real estate.
• In addition, you can say that by doing this, your 1 lakh black per month has gained some interest.
• But in doing so, you are taking a lot of risks.
• You will lose the opportunity to do asset level re-balancing to be able to create more wealth as you are not investing in equity.
• If your gold exposure is too much because of black money.
• Then you can not create more wealth as historically gold gives return very near to inflation only.

What are the advantages of maintaining white money? …

• You can live peacefully without any tensions.
• In addition, you will get the satisfaction that you are not cheating the government and doing a favour to the country.
• You can invest in any asset class at any time.
• In addition, you will have a higher level of liquidity for your assets.
• You can do asset class rebalancing to gain more to increase your wealth. I will tell about this in my future articles.

Conclusion about paying zero tax on your white money…

“If you ride a tiger, one day that tiger may eat you.” Maintaining the black money is like riding a tiger.

I have given the safest and most beneficial option to you.

You may argue that the Sensex has given 15% last year.

What is the guarantee that the Sensex will give a 15% return every year?

Yes, I agree that the Sensex may not give a 15% return every year.

But this question you should ask for your real estate and gold investments also.

Like Sensex, real estate, gold, etc., returns will not be constant every year.

In addition, If Sensex has not given a 15% kind of return and gave 10% kind of return also, paying taxes and investing white money in different asset classes, including equity, is beneficial to you.

There is no guaranteed return in any asset class apart from some government schemes.

In addition, For Financial goals like a child, higher education, or retirement, you need to have money in financial assets, not in physical assets.

So, it’s up to you to follow my view for your investments or not.

If you feel that you do not have expertise and knowledge to invest equity mutual funds, etc.

Then it’s better for you to hire a Sebi Registered Investment Adviser

Read the article, What are the 8 benefits for filing income tax returns? … Click this link to read.

Also, read the article about What is the best way to do a Business?

Also read the article, How to achieve your financial goals like a child, higher education, house, etc. with peace of mind?…

and Read Why hiding tax is tough now a days?…

Also read why real estate is a bad investment?…