Certain professions are subject to a presumptive taxation structure under the income tax rules. There are many questions regarding what the precise system is and if it is appropriate for all professionals.
What exactly is a presumptive taxation scheme?
Section 44ADA of the Income Tax Act allows certain professionals to choose a plan in which they can give 50% of their gross professional revenues as taxable earnings from the profession if the gross professional receipts do not exceed Rs 50 lakh in the relevant year. As a result, if your gross earnings surpass this limit, you will be unable to participate in this plan. For individuals who have not reached the age of 60, the basic exemption ceiling is now Rs 2.50 lakh.
Who is eligible for this programme?
This programme is only open to residents or partnership firms engaged in a certain profession, not to limited liability partnerships (LLP). As a result, non-resident individuals, partnership businesses, or HUFs are unable to participate in this plan. This plan is not available to all self-employed individuals who are not involved in any company activity. Doctors, attorneys, Chartered Accountants, Company Secretaries, architects, engineers, technical consultants, interior designers, some individuals in the film business, and IT experts, among others, are the only qualifying assesses.
In the event that you choose the scheme, the law requires you to keep books of accounts;
If you are qualified for this programme and want to participate in it, the law exempts you from the obligation to keep books of account for that year. It simply implies that you will not have to deal with the difficulties of creating the books of accounts and keeping the spending vouchers. However, if you are registered under the Goods and Services Tax Act, you may still be required to keep your books of account and the relevant paperwork. Individual physicians and attorneys who are not covered by GST are thus exempt from the time-consuming job of keeping books of accounts.
What if your real earnings are more than 50%?
If your real income from your profession exceeds 50%, you must provide a greater proportion of your professional receipts as your professional income since the law does not only prescribe a specific percentage but also allows you to give a higher percentage as your income. Higher income, on the other hand, may be simply produced from your investments and personal costs paid through the banking channel.
Can I alter my mind later?
Every year, a salaried person has the choice of choosing between the old tax regime, which offers many deductions and exemptions but higher returns, and the new tax regime, which does not give such exemptions and deductions but offers a lower rate. Persons working in a profession or company, on the other hand, cannot opt out of the new scheme once you have exercised the choice until you no longer have the business income.
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