Income Tax

Presumptive Tax Scheme For – Doctors / Engineers

Presumptive Tax Scheme for Professionals introduced under Section 44ADA from the FY 2019-20.

This scheme provides a simple method of Taxation for small Professionals.

The benefit of this section can be taken only by specified professionals whose annual gross receipts are under Rs 50lacs.

Specified Professionals here means-

  • Interior decorations
  • Technical consulting
  • Engineering
  • Accounting
  • Legal
  • Medical
  • Architecture
  • Other professionals, as mentioned below:
  1. Movie artists include a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer and costume designers
  2. Authorised representative means a person who represents another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so designated or a person who is carrying on the profession of accountancy
  3. Any other notified professionals as per Govt of India Gazette Notification.

    Who is eligible for the Section 44 ADA

    Condition No – 01 (Any of the Following)

    • Individual
    • Hindu undivided families (HUFs)
    • Partnership firms (note that limited liability partnerships are not eligible)

    And

    Condition No -02

    Having total gross receipts are less than Rs 50 lakh in a year.

    Presumptive Income means for Sec 44ADA

    Higher of the following is offered as presumptive income:

    • 50% of the total receipts from the profession
    • Income offered by the Assessee from the profession

    Example – Ms. Ritu, a Dentist by Profession. Her total receipts for the financial year 2019-20 are Rs 40 lacs. Her Annual expenses are Rs 15lacs towards rent, salary, medicine, electricity, travelling, conference and training etc.  Here we can assume her taxable income under normal provisions and presumptive scheme below. 

    Income Under Normal Income Tax Provisions

    Gross Receipts

    40,00,000

    Less – Expenses

    15,00,000

    Profit

    25,00,000

    Income under Presumptive Scheme

    Gross Receipts

    40,00,000

    Less – 50% deemed expenses

    20,00,000

    Profit

    20,00,000

    In the above table, the Profit under the presumptive scheme is lower than the normal tax provisions. Hence its better for Ms. Ritu to opt for the presumptive scheme of taxation under section 44ADA.

    The benefit to Assessee under this Scheme

    • No need of maintaining books required under Section 44AA
    • No requirement of having accounts audited under Section 44AB

     
    What will happen if Low Income declared than 50 %?

    • Maintenance of Books is must
    • Accounts need to get audited from Chartered Accountant.


    Can we declare Profit of more than 50%?

    Yes. It can be done; Government has no objection if Assessee declares profit more than prescribed under the scheme.

    It’s in favour of Revenue; more Tax collection will be in Government Tax kitty.

    No additional Question can raise by Assessing office (Income Tax officer) if Assessee declares more profit.

    Why people declare Higher Profit?

    • To show more income and pay higher taxes to take benefit for more Home Loan in future. It’s just like an investment in future.
    • A genuine case of more profit then the presumptive evidence. India needs such honest Taxpayers

    Do the Government provide any Benefit to Assessee paying more taxes?

    Every year government issue certificate

    1. Silver
    2. Golden
    3. Diamond

    Basis tax paid. Its government way of recognising Honest Taxpayers.

    Hope you will like to have such certificate in future.

    Stay connected & do check our Youtube Video made on this Topic – Tax Matter of Doctors and Engineers

    CA Gopal Singh Negi
    Co-Founder, MyTaxDost.

    Email- HELP@MYTAXDOST.COM

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