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

As a consequence of sheer ignorance, many working as a advisor go for this scheme with out realizing that they aren’t eligible for this presumptive tax scheme.

The revenue tax legal guidelines supply a presumptive scheme of taxation for sure professionals. There are many doubts about what’s the actual scheme and whether or not each skilled can go for it. I intend to clarify the presumptive scheme of taxation for skilled on this article.

What’s presumptive taxation scheme

As per Part 44ADA of the Revenue Tax Act, specified professionals have the choice to go for a scheme below which they will supply 50% of their gross skilled receipts as taxable income from the occupation offered the gross receipts from the occupation doesn’t exceed Rs 50 lakh within the related yr. So, in case your gross receipts exceed this threshold restrict, you can not go for this scheme.

In case your internet income from the occupation is lower than 50% of receipts and you don’t want to supply the minimal 50% as your revenue, you possibly can definitely accomplish that, however in that case you’ll have to preserve your books of accounts and get these accounts audited from a Chartered Accountant for that yr. Nevertheless, you needn’t get your accounts audited in case whole revenue from all of the sources together with the skilled revenue doesn’t exceed the quantity of fundamental exemption restrict. Presently the essential exemption restrict is Rs 2.50 lakh for individuals who 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 a specified occupation however to not a restricted legal responsibility partnership (LLP). So, non-resident people and partnership corporations or an HUF will not be eligible to go for this scheme.

It isn’t that every one the self-employed not engaged in any enterprise exercise are entitled to go for this scheme. It is just the eligible assesses who’re engaged within the specified professions who can go for this scheme. Only some professions have been specified for this function. These specified professions embody docs, legal professionals, Chartered Accountants, Firm Secretaries, architects, engineers, technical consultants, inside decorators, sure individuals engaged within the movie trade, IT professionals, amongst others.

As a consequence of sheer ignorance, many working as a advisor go for this scheme with out realizing that they aren’t eligible for this presumptive tax scheme. So, all journalists who’re both working as freelancers or consultants will not be eligible for this scheme. Likewise, all insurance coverage advisors, mutual fund distributors or funding advisors can’t go for this scheme. All of the individuals who’re working as consultants with their ex-employer can’t go for it except they’ve the required skilled qualification.

Legislation as regards upkeep of books of accounts in case you go for the scheme

In case you might be eligible for this scheme and go for it, the regulation exempts you from the requirement to take care of your books of account for that yr. What it merely means that you’re saved the hassles of writing the books of accounts in addition to preserving the vouchers for bills. Nevertheless, in case you might be registered below the Items 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 legal professionals who will not be lined below GST are totally free from the tedious job of sustaining the books of accounts.
Although you might be exempted from requirement to take care of your books of accounts, however for my part, you’ll nonetheless should protect related information which can assist you substantiate the quantity {of professional} receipts claimed by you throughout the yr.

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

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

Nevertheless, larger revenue will be simply established from the investments made and private bills incurred by you thru the banking channel. So, for individuals who perform their main transactions by the banking channel, it won’t be attainable to cover the actual fact of precise revenue being larger than 50% of gross receipts. So, earlier than you determine to go for the naked minimal proportion of fifty% which it’s a must to supply as revenue, take a look on the combination of investments made and private bills incurred by you throughout the yr. Such hid revenue could also be taxed as unexplained quantity at 60% together with curiosity and penalty in case the division is ready to show it conclusively.

Can I alter the choice in a while?

From the present yr a salaried particular person has the choice to decide on between the previous tax regime, providing numerous deductions, exemptions, however with larger returns, and the brand new tax regime, with out such exemptions and deductions however providing the decrease charge, yearly. Nevertheless, as individuals engaged in a occupation or enterprise can’t decide out of the brand new scheme upon getting exercised the choice till you stop to have the enterprise revenue. Nevertheless, in case of the presumptive scheme of taxation, knowledgeable can train the choice to have or to not have the presumptive taxation scheme yearly.

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

(The creator is a tax and funding knowledgeable, and will be reached at jainbalwant@gmail.com)