Do you think Tax Audit threshold limit U/s 44AB for Professionals should be increased from 50 lakh ?- My point of view.

What is Profession ?

There is no proper definition of Profession is given under Income Tax Act.
According to Sec 2(36) of Income Tax Act, “profession” includes vocation.
Sec 44AA  deals with the professions that required to maintain books of accounts are,

  • Legal
  • Medical
  • Architectural
  • Accountancy
  • Technical consultancy
  • Interior decoration
  • Any other profession notified by CBDT

Is ‘Income from Salary’ included in ‘Income from Profession’ ?

‘Income from Salary’ is a different income head and it
is not included in ‘Income from Business or Profession’.

Employee gets Form 16 (Certificate of TDS on salary) from Employer.

Where Professionals receives fees or remuneration (not salary) and if they give any service to any institution, that institution gives them remuneration or fees under Sec. 194J of I.T. Act. after deducting 10% TDS.

if your
income from profession (not salary) exceeds Rs. 50 lakh, then your
accounts need to be audited u/s 44AB.

Is Nursing Home a Business or Profession ?

If Nursing Home is owned by an Individual then it will be treated as ‘Profession’. But if it is owned by a Company then it will be treated as ‘Business’ because an artificial body like a company can not be said to possess any personal skill required to practice a profession.

Case reference: Income Tax Officer V. Ashalok Nursing Home (P) Ltd. 2006

What is the Tax Audit threshold limit u/s 44AB for Professionals ?

As per Sec. 44AB
of Income Tax Act, A Professional man need to be audited his account if
his gross receipts from Profession exceeds Rs. 50 lakh.

What is Presumptive Taxation (u/s 44ADA) for professionals ?

According to Sec. 44ADA of I.T. Act, an assessee whose gross total income does not exceeds Rs. 50 lakh may declare 50% of his gross receipt as income and after deducting u/s 80C, he need to pay tax on post deduction taxable income. Professionals who are specified at sub section (1) of Sec. 44AA are eligible for presumptive taxation.

Can professionals get any benefit in Presumptive Taxation (u/s 44ADA) ?

Generally, professionals do not have much expenses to declare. By declaring 50% of income as profit and rest as expense, a lot of tax saving can be done.

Suppose an salaried employee engaged in a side profession such as freelancer, consultant etc. Does he get benefit u/s 44AD (Presumptive Taxation) ?

The answer is ‘Yes’. Actually he have two kinds of income ‘Income from salary’ and ‘Income from profession’. Salary income is computed in normal way and presumptive taxation is applicable on Professional income.

Which is the correct ITR for Presumptive income ?

Should the Tax Audit limit u/s 44AB for Professional be increased from 50 lakh ?

Currently, the tax audit limit u/s 44AB for professionals is 50 lakh. But I think this limit should be increased for the following reasons.

  • If professionals give any service to any institution, that institution gives them remuneration or fees under Sec. 194J of I.T. Act. after deducting 10% TDS. It means tax will be deducted whether gross receipt from profession is above 50 lakh or not. So chance of tax evasion is low in case of professionals.
  • A businessman may show his annual turnover is below 1 Cr to avoid tax audit with the intention of tax evasion. But if professionals give any service to any institution, their gross receipt will be shown at TDS certificate (Form 16A). So, again chance of tax evasion is low.
  • Government is simplifying taxation system day by day. So, we hope that govt. should increase the tax audit limit for professionals to give relief some professionals from tax audit.

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Originally posted 2020-01-15 00:44:54.

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