Introduction of Presumptive taxation to professionals

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.

A simple flow chart will be useful to understand the above concept.FLOW CHART

In case of any discussion required for taxation and audit matters on above matter, feel free to contact me at [email protected]

Charvik Momaya

About Charvik Momaya

Charvik finished his articleships from APD and joined a reputed firm called N M Raiji & Co. for two years. He joined back APD with wide exposure in the field of Audits under Income Tax, VAT, Companies Act, etc. Apart from this, Charvik focuses on compliance assurance from management standpoint. He provides value addition to the clients in form of control lapses and proactive compliance management so as to avoid regulatory traps. Charvik has a strong understanding of the laws visa-vis the business scenarios.He has worked with companies like Gratuity Funds, Mutual Fund, Consumer Durables, Asset Reconstruction Company amongst others.

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