Entrepreneur vs Salary individual
In India, the middle-class ethos is deeply rooted in the belief that a stable, high-paying job is the ultimate goal. Parents push their children to study relentlessly for 14-18 hours a day, sacrificing their youth and often their mental health in pursuit of academic excellence. The endgame? A coveted 9-6 job that promises security and a comfortable life. But the reality for many salaried employees is starkly different from this ideal.
“A 9-6 job provides stability, but true fulfillment often lies beyond the comfort zone.”
The Myth of the Comfortable 9-6 Job
High Educational Costs
The journey begins with exorbitant educational expenses. From private schooling to coaching for competitive exams, the financial burden on middle-class families is immense. Parents invest their savings, and sometimes even take loans, to ensure their children get the best education possible. The assumption is that this investment will pay off with a lucrative job offer.
Stuck in Debt Traps
Once these well-educated individuals enter the workforce, they often find themselves immediately entangled in debt traps. High living costs, coupled with aspirations to own a home, car, and other amenities, lead to significant loans. EMI payments quickly eat into their monthly salaries, leaving little room for savings.
The Tax Burden
The taxation system further compounds the issue. Salaried employees in India face a high tax burden with few avenues for relief. Income tax slabs are steep, and despite various deductions and exemptions, a substantial portion of their earnings goes towards taxes. In contrast, business owners have numerous ways to optimize their tax liabilities legally. They can deduct expenses, claim depreciation on assets, and take advantage of various tax credits. How is taxation killing individual one’s life and stealing future, pls read my article here.
“Entrepreneurship: Where your passion becomes your paycheck and the sky is the limit.”
The Financial Advantages of Running a Business
Tax Benefits
Business owners enjoy considerable tax advantages. They can write off business expenses, including office supplies, travel, and even the depreciation on assets like cars and machinery. For instance, if a company buys a car, they can claim depreciation and possibly GST input tax credit, significantly reducing the effective cost. In contrast, an individual salaried employee buying the same car would bear the full GST and cess, with no tax relief.
Wealth Accumulation
Running a successful business can be far more rewarding financially than a salaried job. Profits from the business can be reinvested to generate more income, and the potential for growth is virtually unlimited. Many businesses also benefit from lower effective tax rates due to strategic tax planning.
Flexibility and Control
Business owners have greater control over their work-life balance compared to salaried employees. They can decide their working hours, invest in their passions, and build something of their own. This autonomy often leads to greater job satisfaction and a better quality of life.
The Misguided Pursuit of Job Security
The Risk of Job Insecurity
The supposed security of a 9-6 job is often an illusion. Economic downturns, company restructuring, and automation pose constant threats to job security. In contrast, business owners, though facing their own set of challenges, have the power to adapt and innovate to stay afloat.
The Need for a Mindset Shift
It is high time for a paradigm shift in the middle-class mindset. Instead of solely focusing on academic excellence and securing a high-paying job, parents and young individuals should also consider entrepreneurship as a viable and potentially more rewarding path. The skills and effort put into securing a job could be redirected towards building a business, which can provide not only financial security but also substantial tax benefits and personal fulfillment.
Summaries at one place with conclusion
The middle-class obsession with 9-6 jobs needs a re-evaluation. The current system often leaves individuals in a cycle of debt and high taxation with limited scope for significant wealth accumulation. In contrast, entrepreneurship offers the potential for greater financial rewards, tax benefits, and personal satisfaction. It is essential for the middle class to broaden their perspective and consider the myriad opportunities that business ownership can offer, potentially transforming their financial futures.
I strongly recommend that all parents educate their children about the taxation system and its implications, allowing them to make informed decisions about their career paths. Read a book –The Lean Startup
Comparative Analysis: Buying a Luxury Car by an Entrepreneur vs. a High-Salary Individual
Scenario: Purchasing a luxury SUV priced at ₹1 crore (Cr).
Breakdown of Costs:
Base Car Price: ₹1 Cr
GST (28%): ₹28 L
Compensation Cess (22%): ₹22 L
Effective Price: ₹1.5 Cr
Entrepreneur’s Perspective:
Initial Payment: ₹1.5 Cr from the company’s account.
Tax Benefits: The entrepreneur can claim the entire ₹50 L (GST + Cess) as input tax credit against their business, effectively reducing the cost of the car to ₹1 Cr.
Additional Benefits:
– Operational expenses related to the car can be expensed through the business.
– Depreciation benefits of 15-20% annually (not considered in this analysis but significant for long-term cost reduction).
Final Cost for Entrepreneur: ₹1 Cr
High-Salary Individual’s Perspective:
Total Purchase Cost: ₹1.5 Cr
Tax Implications:
1. Income Tax: Assume a salary package ₹6 Cr per annum, leading to the following deductions:
– Slab-based Tax (30%): ₹1.8 Cr
– Surcharge (25%): ₹45 L (on ₹1.8 Cr)
– Health and Education Cess (4%): ₹9 L (on ₹1.8 Cr + ₹45 L)
2. Total Tax:
– ₹1.8 Cr (income tax) + ₹45 L (surcharge) + ₹9 L (cess) = ₹2.34 Cr [ which is 39% of 6Cr]
– To net ₹1.5 Cr, a high-salary individual must effectively earn ₹2.46 Cr pre-tax ( ₹1.5 Cr + ₹0.96 Cr).
Final Cost for High-Salary Individual: ₹2.46 Cr
Comparative Summary:
– Entrepreneur: Total cost of the car is ₹1 Cr, benefiting from input tax credits and additional operational and depreciation advantages.
– High-Salary Individual: Effective cost of the car is ₹2.46 Cr, accounting for income tax, surcharge, and cess. This represents a 146% increase over the entrepreneur’s cost.
for more details on this subject, please check out the Article : Job-The Biggest Scam on Planet Earth
This analysis underscores a significant financial advantage for entrepreneurs purchasing assets like luxury cars. They benefit from input tax credits and business-related deductions, effectively lowering their out-of-pocket costs. In contrast, high-salary individuals face substantial tax burdens that significantly inflate their effective costs. This disparity highlights systemic advantages favoring business owners and can contribute to increasing wealth inequality.
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