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ITR Filing For Professionals Under Presumptive Taxation – FileMyReturn

ITR filing is a necessary obligation for every taxpayer in the country. It is also crucial for professionals to meet tax compliance and maintain financial transparency.

The professionals (doctors, consultants, freelancers, etc.) need to be familiar with the tax laws that apply to their professions. However, understanding everything can be overwhelming due to the complexity and constant changes in tax laws. That’s where FileMyReturn comes in – we are here to help simplify the process for you.

ITR Filing includes deductions, exemptions, and relevant income types that ensure accurate tax filing.

Few Of The Key FAQs That Professionals Have While Filing ITR

1)  Who is considered a Professional?

As per the Central Board of Direct Taxes (CBDT), professionals are individuals who belong to certain specific fields as listed. These fields include:

·       Legal

·       Medical

·       Engineering

·       Architecture

·       Professional Accountancy

·       Technical Consultancy

·       Information Technology Professionals

·       Interior Decoration

·       Artists

·       Company Secretary

It’s important to note that the list provided by the CBDT is not exhaustive, and there may be other fields or professions that are also considered “professional” for various legal, taxation, or regulatory purposes.

2)  What is the difference between salaried and professional income?

Salaried income is the money you earn when you work for an organization, usually a company. Taxes are taken out of your paycheck each month and listed on your salary slip. Professional income, on the other hand, comes from providing specialized services to clients. For example, someone who works at XYZ Ltd. receives a salary, while a freelance legal expert who provides legal advice is considered a professional. It’s important to know that if you earn both types of income, only your professional income will be used to calculate presumptive taxes.

Also Read: ITR Filings – Definition, Types, Documents, Steps To File With FileMyReturn

3)  What is Presumptive Taxation?

Presumptive tax is a taxation approach that utilizes indirect methods to determine the tax liability by making assumptions about the taxable income rather than relying on actual figures. Under this method, a business entity or a professional is required to declare a specific percentage of its business turnover (or gross receipts, in the case of professionals) as its income and pay a fixed percentage of it as taxes. As per the Finance Act of 2016, professionals (as notified by the CBDT) with gross receipts up to Rs. 50 Lakhs for the period between April 1st, 20XX, and March 31st, 20XX, have the option to choose presumptive taxation.

4)  Distinction between Normal Taxation & Presumptive Taxation?

The distinction between normal tax and presumptive tax lies in the method of computing income for tax purposes:

Under Normal Taxation, income is calculated –

Income = Gross Receipts – Professional Expenses – Depreciation on assets used for professional purposes.

·       Gross Receipts: Total revenue earned from all professional services.

·       Professional Expenses: Expenses incurred to provide professional services, including items like office rent, internet, telephone, business travel, and business promotion costs.

·       Depreciation: Represents the decrease in the value of assets used to deliver professional services, such as laptops, printers, vehicles, etc.

The income tax is then levied only on the net income after deducting professional expenses and depreciation.

On the other hand, Presumptive Taxation is designed to simplify income computation for professionals, and the income is calculated as follows:

Under Presumptive Taxation:

Income = 50% x Gross Receipts (for the period from April 1st, 20XX, to March 31st, 20XX).

Here, the income is considered 50% of the gross receipts, and the tax is levied on this presumptive income. The detailed computation of professional expenses and depreciation is not required for presumptive tax.

For Individuals and HUF (Hindu Undivided Family), the income tax will be payable based on the tax slabs applicable to their presumptive income. Presumptive tax aims to simplify the tax process for eligible professionals, reducing the burden of maintaining detailed accounts and making the tax calculation more straightforward.

5)  Is it possible to opt out of the presumptive taxation scheme?

Yes, you have the option to opt out of the presumptive taxation scheme whenever you prefer. However, if you choose to do so, you will be ineligible to file your taxes under the presumptive tax scheme for the next five consecutive years. For instance, if you filed presumptive tax returns for FY16-17 and decide to switch to normal taxation for FY17-18, you will not be eligible for the presumptive tax scheme until FY22-23.

6) As a professional eligible for presumptive tax, am I obligated to file returns under the presumptive taxation scheme?

No, it is not mandatory. You have the freedom to continue filing your returns under normal taxation. Likewise, if you decide to file under presumptive taxation, you can opt out of the scheme at any point.

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