ITR filing: Professionals in specified fields can declare 50% of gross earnings as taxable income. They can claim expenses over 50% if they can substantiate them. The deadline for filing tax returns is July 31
ITR filing: If you are working as a freelancer or consultant who is engaged in certain specified professions and has total gross receipts not exceeding ₹50 lakh in a financial year then there is some good news for you. The eligible professionals can pay tax on half of their annual gross income. This can be done by opting for a presumptive taxation scheme of the Income Tax Act.
As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account and further, he has to get his accounts audited. Maintaining books of account is not an easy task and becomes difficult work for small taxpayers. To relieve them of this tedious work, the Government started a scheme of presumptive taxation. This scheme is incorporated in Section 44AD, Section 44ADA of the Income Tax Act 1961.
“Under Section 44AD of the Income Tax Act, small taxpayers with a total turnover or gross receipts of up to ₹2 crore ( ₹2,00,00,000) in a financial year are eligible to opt for the presumptive taxation scheme. As per this scheme, such taxpayers are not required to maintain detailed books of account. Instead, their profits are presumed to be 8% of their total turnover,” said Abhishek Soni CEO and Co-founder Tax2win.
However, there’s a special provision that if the taxpayer receives payments through digital means or banking channels, the presumptive profit rate is reduced to 6% of the turnover instead of 8%. This measure aims to promote digital transactions and discourage the use of cash, he added.
Section 44ADA is specifically designed to provide relief to resident individuals in India who are engaged in certain specified professions and have total gross receipts not exceeding ₹50 lakh in a financial year. The specified professions include:
Legal
Medical
Engineering or architectural
Accountancy
Technical consultancy
Interior decoration
Any other profession as notified by the Central Board of Direct Taxes (CBDT).
Under this scheme, eligible professionals are allowed to declare 50% of their gross earnings from the profession as their taxable income for the relevant financial year. “The assumption behind this scheme is that professionals typically have lower expenses compared to businesses. Therefore, instead of maintaining detailed books of account and calculating actual expenses, the taxpayer can simply consider 50% of their total receipts as their taxable income,” explained Soni.
It’s essential to note that while 50% is the presumed income, eligible professionals can declare higher profits and claim expenses over 50% of the total receipts if they believe their actual expenses are higher and can substantiate the same. However, if they choose to go with the 50% presumed income, they are not required to maintain books of account.
While filing the ITR under the presumptive taxation scheme (Section 44ADA), the individual has to choose Form ITR-4. If the individual also has capital gains, they have to select Form ITR-3.
If you haven’t filed yet, you should rush and complete the process as soon as possible as the deadline of July 31 is just two days away.
Source: https://www.livemint.com/money/personal-finance/itr-filing-how-income-tax-outgo-becomes-half-for-consultants-11690525398823.html
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