About Me

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Mumbai, India
I run an IT Security consulting firm based out of India. We started off from scratch in 2001 when I was 21, and have offices in Mumbai, Bahrain, and UAE. The idea behind the blog is to share the stories of how we run the business, the deals we make, the deals that break, the heartburn, and the sheer joy.

The Ultimate Startup Guide

The Ultimate Startup Guide is an e-book that provides answers to all your questions related to starting and growing a business in India. Everything you wanted to know about entrepreneurship in India from ideation to registration to marketing to hiring. The book contains a large number of practical examples, anecdotes, interviews, and motivational material to help you get started, and to grow rapidly in a booming Indian economy. If you've got the idea, this book will help you through with the execution and realize your dreams. Here are some of the key questions you will find answered in this book:
  • When starting a business, what are the legal issues involved?
  • What form of incorporation is better suited to which type of business?
  • What tax issues are involved?
  • How do I start a business and what are the pitfalls?
  • How do I market my business in the absence of significant funding?
  • How do I get funded?
  • What are the basic accounting concepts I should be aware of?
  • What is a business plan and how should I build one?
The brief table of contents of the book is as follows:
  1. Getting started
  2. Ideation
  3. Forms of Enterprises
  4. Funding
  5. Basic Accounting and Taxation
  6. Import and Export Licensing
  7. Trademark and Patenting
  8. Rules for NRIs and Foreigners
  9. Building a Business Plan
  10. Marketing on a Shoestring
  11. Website and Branding
  12. Women Entrepreneurs
  13. Templates
To order the Ultimate Startup Guide - email me at kkmookhey@gmail.com.

Details of the book are:
Title: The Ultimate Startup Guide
Author: Kanwal Mookhey
Pages: 150
Additional: Companion CD contains numerous templates for building your business plan, calculating cashflow, preparing profit and loss, and balance sheets, preparing invoices, your resume and profile, marketing material, websites, contracts, and many other useful and motivational material.

Monday, April 24, 2006

Tax woes

While, we've never really had any major issues with the tax department, we're now beginning to hit their radars. Also, given our current size, the outflow of tax this year was a pretty significant number. I sat down to list out all the different sorts of tax we pay:

1. Income tax: the most straightforward of them all, calculated at 33% of our profit. However, this needs to be paid as advance tax every quarter, not just at the end of the year. The advance tax is estimated at 30% of 30% of revenues for that quarter. So approximately 10% of quarterly revenues. If at the end of the year, calculations reveal that we ended up paying less advance tax than was actually due, we pay the remaining with interest! Or else, the IT department refunds the excess, also with interest.

2. Tax deducted at source (TDS): for all payments made by us to others, including employees, we need to deduct tax at source. The rates of deduction differs based on the service provided to us. It is also our responsibility to pay the tax liability of our employees. This is pretty important, as the fines for not paying this are pretty severe. TDS is to be paid monthly.

3. Service tax: This was the real killer. Till last year it was 10%, plus a 5% cess for education - some government scheme for providing education to underprivileged kids. This year, it became 12% plus the cess. So every service, we provide we pay 12.24% service tax. This is also paid monthly. But you get a rebate for the service tax you pay out to entities that provide services to you.

4. Fringe benefit tax: One of the greatest benefits of running a company is that a wide range of expenses can be booked to the company, thus reducing the profit and saving on tax. I am sure, I'll have a tough time explaining to the IT department how exactly a new Tag Heur watch could be a business expense. But the government got smart and decided to impose a tax on all these antics - so food, travel, beverages, and a whole host of other perks and privileges given to employees and us poor founders are now taxed at 6%. Also payable monthly.

5. Sales tax and Octroi: We not only sell services, but every now and then manage to sell one of our products (software) as well. This entails a sales tax payout, and if being sold outside state boundaries, Octroi as well. I still haven't gotten a handle on the whole VAT system, but I think that will now replace the Sales tax.

6. Professional tax: How could I forget this one! Depending on the salary slabs, there is a monthly payout of professional tax per employee. Its just about Rs. 200 per employee per month. I had no idea this existed, and last year we had to end up paying all the professional tax we owed for the previous 4 years, and then the interest on it as well. Sheesh!

It's a wonder, we manage to keep the business running! We're left with not much choice except to establish an overseas entity in a tax-free country, probably somewhere in the Middle East, at least for the revenues from clients in that region. Hmm...now where's that forex rulebook?

2 comments:

Anonymous said...

You are simply brilliant!!!! Keep us inspired by your articles.

Huzefa Saifee said...

Pheaw.....
That's why people around me dread taxes. Surely our county's governments have bugged entrepreneurs with this crap. No wonder people have to be corrupt to save their hard-earned wealth and income.