Changes in
Business regulations and disruptive upgrades in technology are
forcing organizations to turn to professionals and consultancy
services to meet income tax
filing norms, returns, audit
services and registrations
under the GST. Clearly,
no firm can survive for long if it fails to take advantage of market
signals and constantly mutating demand.
Professional Services include
Accountants, Auditors, Consulting Manager, Architects, Engineers and
Lawyers. According to a recent report by Deloitte, low cost of
operations and a large pool of qualified service providers including
bookkeeping
services make it very attractive for firms, both domestic
and international to contract such persons to successfully meet
emerging challenges.
Maintaining Books of Account
According to Section 44AA of the
I-T Act read in conjunction with Rule 6F, apart from the
above-mentioned categories of professionals, doctors, tech
consultants, interior decorators, film artists and designated
representatives of such tax assessees are required to perform
bookkeeping or use a
service provider if
their gross income exceeds Rupees 1,50,000 in a year. Moreover, the
annual turnover must have exceeded this threshold limit of Rupees
1,50,000 in each of the preceding three years to attract income tax
for this assessment year.
Allowance of Presumptive Income Tax
- In order to bring small professionals on par with small business owners, Section 44ADA was introduced into the Income Tax Act, 1961. This section allows an eligible small tax paying person to claim a prescribed rate of income in lieu of maintaining a cumbersome record of accounts.
- A Professional can make a declaration claiming 50% of his/her gross annual fees as presumed income as long as those fees remain under Rupees 50,00,000/-. This 50% is deemed to be the profits of the professional for which he is liable to pay income tax.
- For efiling income tax returns under the presumptive income tax category, the professional cannot claim any further deductions from taxable income.
- It is mandatory to deposit advance tax in respect of the coming year by the 15th of March of the current year associated with income earned from profession or else have to pay interest on taxes due according to Section 234C.
- Once a tax assesse chooses to pay taxes under the Presumptive Income scheme he is locked in this system for a period of five years. Should he be unable to pay the prescribed taxes at the prescribed rate, he forfeits this option for the next five years.
- If a professional declares taxable income on his tax return form as being less than 50% of his gross annual income and his income is greater than that exempted from tax, he must maintain Books of Account (Section 44AA) and have his accounts audited (Section 44AB).
- The relevant income tax return form for professionals is ITR 4 unless you declare capital gains and a second house or property income.
- GST laws should be taken into account while making bills of service.
When should Presumptive Income Tax not be used to file your ITR?
Income Tax can also be filed without
the Presumptive Tax option and may be a good choice if your expenses
frequently deflate your profits by more than half of your receipts.
In such a case it is best to maintain records, receipts, vouchers and
full books of account.
Further, all your receipts and bills
must include provisions for assessment
under the GST with
additions at the rate of 18% of the nominal selling price of the
service including your GST
Registration number. If you claim Input
Tax Credit or refunds for taxes paid at the time of purchasing
supplies such as office space rental, electricity charges and so on,
you should, ideally, pass on the benefits to the buyer of your
service. It is possible that this duty may be made legally
enforceable in the future.
In the current volatile scenario,
changes in policy and technology are coming in thick and fast. In
such a situation, employing an economical
bookkeeping
services
provider is a good investment to ensure your earnings
remain penalty-free and legally compliant.
Comments
Post a Comment