Income Tax: CA Shares Trick Used By Middle Class With High-Paid Jobs To Save Lakhs In Taxes

Smart planning is crucial for high-income earners to save more on their total income tax liability due to steep tax rates. These days, high-income professionals are resorting to various innovative ways to reduce their overall tax liability. In a recent LinkedIn post, a Chartered Accountant, Meenal Goel, shared how high-income professionals are switching from salaried roles to save on taxes. 

“High-income professionals are not drawing salaries anymore. Instead, they are becoming consultants….It’s not just for freedom or flexibility…but to save lakhs, sometimes crores, in taxes,” the post read.

In the post titled “Salaried middle class is using this trick to save lakhs in taxes”, she explained that earning Rs 60 lakh annually as a salaried employee under the new tax regime means losing over Rs 18 lakh to taxes. With limited exemptions like HRA or LTA, the tax burden is heavy.

In contrast, consultants can claim business expenses and invest smartly. This helps them to reduce their taxable income significantly.

“If you’re salaried at Rs 60 lakh per year, you get a few standard deductions, HRA, LTA, etc. Under the new tax regime, most exemptions are gone. End result? You pay 30% taxes… that’s more than Rs 18 lakh straight out of your pocket. But if you register as a consultant….Deduct expenses like office rent, staff salaries, internet, laptops and travel…. Even with Rs 60 lakh income, your taxable portion can shrink massively,” Goel said.

She also explained that while salaried professionals benefit from simplicity in compliance due to Form 16, EPF and insurance, among others, that is not the case for consultants.

“But consultants can legally structure income, reduce tax liability and keep more in hand. Of course, it comes with risks….No fixed paycheck….No PF or paid leaves…More compliance and bookkeeping,” the post further read.

Goel added that despite these risks, many high earners feel that financial stability through a fixed salary is simply too expensive. 

“While the middle class sticks to the comfort of a salary slip… the wealthy are using consultants’ flexibility to build more wealth,” she added.

Many LinkedIn users, who agreed with Goel’s observations, highlighted that consultancy is a standard practice in many nations.

Others warned of risks that are associated with such roles. “Consultants have liberty to show 'expenses' up to 50% of professional Fees, but are vulnerable to scrutiny,” a user said.

Another user noted that while consultancy roles have more flexibility over finances, the lack of stability could be a challenge.

“Both are good, but it depends upon the human nature of the risk-taking and flexible working or a steady job with fixed pay and other benefits,” read a comment.