Are you a professional?
Check out the Presumptive taxation for professionals to save on taxes!!!
OPINION: Why budget proposal on phasing out income tax exemptions ...
What is presumptive taxation?
For small tax payers having income from profession usually have an additional burden of tax compliance. To simplify this, in 2016, a scheme of presumptive taxation was introduced under section 44ADA of the Income Tax act. This is welcome measure for small professionals who will not be required to maintain books of account and offer straightway their income at 50% of their gross receipts.
How will income be computed?
For computation of income, gross total income is considered to be higher of the following:
- a. 50% of the professional Income or
- b. Income from the profession as offered by the Assessee
What are the conditions to be fulfilled?
Income should be included in the list of professional income
- a. Total gross receipts should not exceed Rs.50 lacs in the previous year
- b. Should be resident assesse
- c. Should be either individual or Hindu undivided family or partnership firm. Limited Liability partnership firms are not covered
What are the benefits of this scheme?
- a. Need not maintain books required to be kept u/s 44AA
- b. Need not get the accounts audited u/s 44AB
What if the actual income is less than the presumptive income?
If the Assessee claims that the actual profits from the profession are lower than the profits deemed to be his income under Section 44ADA(i) and his income exceeds the basic exemption limit, then they will have to maintain books required to be kept u/s 44AA and also get the accounts audited u/s 44AB
Will other deductions be also allowed?
Other deductions u/s 30 to 38 shall be deemed to have been allowed. No further deductions under these sections can be claimed. Accordingly, the written down value of any asset used for the purpose of the profession of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for the relevant assessment years.
Check which professions are covered?
- Professions covered under this scheme are:
- Interior decorations
- Technical consulting
- Engineering
- Accounting
- Legal
- Medical
- Architecture
- Other professionals
- Authorized representatives
- Film Artists
- Certain sports related persons
- Company Secretaries and
- Information technology
- Any other notified professionals
Our Guest Author: CA Nishita Doshi She is a Chartered Accountant (CA) and Chartered Financial Analyst (CFA) by profession and is currently working as Analyst at Groww Mutual Fund. Her work comprises listed company research pans across various sectors such as Consumer, Retail, Chemicals, Durables and Electricals. She is 1st attempt CA and also have cleared all 3 levels of CFA. CA Nishita Doshi can be reachable at Linkedin
Disclaimer: The views and opinions expressed in this article are those of the Guest Author are of personal and do not necessarily reflect the views or positions of any current business entity or previous entities.
