What is presumptive taxation scheme for professionals? Who can opt for it?

Due to sheer ignorance, many working as a marketing consultant opt for this scheme with out realizing that they don’t seem to be eligible for this presumptive tax scheme.

The earnings tax legal guidelines provide a presumptive scheme of taxation for sure professionals. There are plenty of doubts about what is the precise scheme and whether or not each skilled can opt for it. I intend to clarify the presumptive scheme of taxation for skilled on this article.

What is presumptive taxation scheme

As per Section 44ADA of the Income Tax Act, specified professionals have the choice to opt for a scheme below which they can provide 50% of their gross skilled receipts as taxable income from the occupation supplied the gross receipts from the occupation doesn’t exceed Rs 50 lakh within the related year. So, in case your gross receipts exceed this threshold restrict, you can’t opt for this scheme.

If your internet income from the occupation is lower than 50% of receipts and you don’t want to provide the minimal 50% as your earnings, you can actually achieve this, however in that case you’ll have to keep your books of accounts and get these accounts audited from a Chartered Accountant for that year. However, you needn’t get your accounts audited in case complete earnings from all of the sources together with the skilled earnings doesn’t exceed the quantity of fundamental exemption restrict. Presently the fundamental exemption restrict is Rs 2.50 lakh for those that haven’t accomplished 60 years of age.

Who can avail this scheme?

This scheme is accessible solely to a resident particular person or a partnership agency engaged in specified occupation however to not a restricted legal responsibility partnership (LLP). So, non-resident people and partnership companies or an HUF should not eligible to opt for this scheme.

It is not that each one the self-employed not engaged in any business exercise are entitled to opt for this scheme. It is solely the eligible assesses who’re engaged within the specified professions who can opt for this scheme. Only just a few professions have been specified for this goal. These specified professions embody docs, attorneys, Chartered Accountants, Company Secretaries, architects, engineers, technical consultants, inside decorators, sure individuals engaged within the movie trade, IT professionals, amongst others.

Due to sheer ignorance, many working as a marketing consultant opt for this scheme with out realizing that they don’t seem to be eligible for this presumptive tax scheme. So, all journalists who’re both working as freelancers or consultants should not eligible for this scheme. Likewise, all insurance coverage advisors, mutual fund distributors or funding advisors can not opt for this scheme. All the individuals who’re working as consultants with their ex-employer can not opt for it except they’ve the desired skilled qualification.

Law as regards upkeep of books of accounts in case you opt for the scheme

In case you’re eligible for this scheme and opt for it, the legislation exempts you from the requirement to take care of your books of account for that year. What it merely means that you’re saved the hassles of writing the books of accounts in addition to preserving the vouchers for bills. However, in case you’re registered below the Goods and Service Tax Act, you should still have to take care of your books of account and protect the required paperwork. So, particular person docs and attorneys who should not lined below GST are totally free from the tedious process of sustaining the books of accounts.
Though you’re exempted from requirement to take care of your books of accounts, however for my part, you’ll nonetheless need to protect related data which can assist you to substantiate the quantity {of professional} receipts claimed by you through the year.

What in case your precise income are greater than 50%?

In case your precise earnings from occupation is greater than 50%, for my part, it’s important to provide such greater proportion of your skilled receipts as your skilled earnings because the legislation doesn’t simply stipulate the fastened proportion however has provision for providing such greater proportion as your earnings. Since you aren’t required to take care of your books of accounts, it could be usually tough to show that your precise earnings is greater than 50% of your gross receipts.

However, greater earnings can be simply established from the investments made and personal bills incurred by you thru the banking channel. So, for those that perform their main transactions by the banking channel, it won’t be potential to cover the actual fact of precise earnings being greater than 50% of gross receipts. So, earlier than you resolve to opt for the naked minimal proportion of fifty% which it’s important to provide as earnings, take a look on the mixture of investments made and personal bills incurred by you through the year. Such hid earnings could also be taxed as unexplained quantity at 60% together with curiosity and penalty in case the division is capable of show it conclusively.

Can I modify the choice afterward?

From the present year a salaried individual has the choice to decide on between the outdated tax regime, providing numerous deductions, exemptions, however with greater returns, and the brand new tax regime, with out such exemptions and deductions however providing the decrease rate, each year. However, as individuals engaged in a occupation or business can not opt out of the brand new scheme upon getting exercised the choice till you stop to have the business earnings. However, in case of the presumptive scheme of taxation, an expert can train the choice to have or to not have the presumptive taxation scheme each year.

I’m certain the dialogue will assist you to higher perceive the presumptive scheme of taxation for professionals.

(The creator is a tax and funding professional, and can be reached at [email protected])

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