Introduction of Presumptive taxation to professionals
In current scenario, income tax provides for a simplified presumptive taxation scheme for certain eligible persons engaged in certain eligible business only and not for persons earning professional income.
Now, the Finance Minister , Mr Arun Jaitley in his proposed Budget for 2016, has proposed to extend the scheme of presumptive taxation to professionals also. From April 1, 2016 onwards, professionals in the fields of legal, medical, engineering, architecture, accountancy, technical consultancy or interior decoration or any other profession notified by government having receipts of Rs 50 lakhs or less can show profit @ 50% of turnover and discharge taxes on it. A few examples of professions that are getting covered are lawyers, Company secretaries, Chartered Accountants, Cost Accountants, Writers, Actors, Interior designers, architects, etc. Such Small & Medium Enterprise ( SME ) professionals will not be required to maintain books of accounts and go through the tedious process of maintaining accounting records of expenses and for claiming deductions from income. The professionals are required only to maintain documents for revenue shown.
The professionals can take benefit of this provision and reduce their tax compliances in a big way. However, it has to be noted that in case actual profits are less than 50% of the receipts of the professional, he can pay taxes assuming 50% profit or get his accounts audited by a Chartered Accountant and show lower profit and in effect pay tax at lower amount. The professional can exercise any of the above 2 options based on his cost – value analysis.
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