The 4 types of professions in the system

Every coin has got two sides ‘Heads’ or ‘tails’. However, when it comes to people there are multiple types and they are also treated differently according to the category they belong though the good news is they are also taxed accordingly in the system (some more and some less).

It’s like i.e. if there is a huge supply of cotton & sugarcane is rare in some country than for sure the cotton prices are very low & sugarcane will be expensive in this place.

Now, let’s look at any country economy – whom do you think impacts it the most.

If you have thought the answer is 'businessman' then you are correct, as they are the ones who create employment and employ people and thus making the wheels of the economy move, which in return provide the wealth to make better facilities for the common person.

However, would any business run without money? So, the most important people in any economy is the one who have the wealth and who are putting it to use in the form of investment (It may sound unfair that I am saying that the wealthy people are the most important however if they won’t be there then, in fact, there won’t be any jobs available as well). They are the ones who are oiling the machines to keep running smoothly.

So, Let’s see the different kind of people in the system and how much they are taxed (Do see where you fall and can you move to some other category)

1.     Employee or service person: This is a person who goes every day to an office to work and then comes back to his house. The Government feels that they are important however they consume the maximum resources and thus they have to pay the maximum taxes on their salary and they are taxed according to the tax bracket with no incentive.

Their whole salary is transparent i.e. On 1^st of every month the money get transferred to the bank and thereon they withdraw to run their household.

2.      

Freelancers or Consultant: This is a category, which runs it’s own business i.e. while they mostly don’t recruit others but they are their own enterprise.

They have to keep a lookout for the Jobs and don’t depend on a single organization. Therefore, the government gives them an incentive i.e. Whatever expenses they do in finding their next client i.e. Transport, meeting cost etc they can put that in expenditure and no taxes will be levied on it till the time they are justifiable.

3.     Businessman: Now they are the people re not just creating job opportunities for themselves for many others in the system and for doing this they get a huge benefit from the government i.e. They can show all their expense required to expand the company as company expenses and it will be deducted from the profit of the company.

a.     So, if they are going to Goa for a meeting and plan to stay there for 3 extra days –They can actually show the trip for being off 4 days and put that on company expense.

       

     4.     Investors: However, this is one category, which is above all as they put money in the system. Though just to be fair, the government has created two segments in this.

a.     Short term investors: These are those who puts the money for a period of less than a year i.e. they put their money but at the slight hint of profit or loss they take their money out. As no industry can really value this money, therefore these people are taxed at the same rate in which their income falls. So if someone makes more than 10 LPA then they will be taxed at flat 30%.

b.     Long-term Investors: This is my favorite category and also helps the economy the most i.e. If you are willing to put your money and extend it to more than a year than all your gains are tax-free including the dividend. So an investor just doesn’t have to think about the taxes as well.

Note: An investor also needs to pay the Transaction fees and government charges while buying and selling the shares.

And the best part of ‘Investors’ is that anyone can become an investor with an amount as small as 10,000/-

I hope this gives you a clarity pertaining why investing is important and why I promote the long-term investing instead of short term investing.

Hope to see you helping the economy and also save some taxes along the way.

Do read the other articles- if you would like to know how to become a good Long-term investor.

http://newsthatcount.blogspot.in/2017/03/main-bhi-khareed-leta-hoon.html - Main bhi khareed le loon kya.

http://newsthatcount.blogspot.in/2017/01/returns-acha-hain-le-lo.html - Returns ache hain.