Are you a professional? Check out the Presumptive taxation to save on taxes!!!

Are you a professional?

If Yes, you should check out the Presumptive taxation for professionals to save on taxes!!!

Presumptive Taxations - A tool for Professionals to save tax

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
  

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

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?

Benefits of the scheme includes: 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.

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Author

CA. Nishita Doshi

Research Analyst

She has 7+ years of Financial Services industry experience including over 4 years in Equity Research Industry specially into Institutional Equities side. She is qualified Chartered Accountant

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