Presumptive Tax Scheme for Professionals: 5 Things You Should Know

The presumptive taxation scheme (PTS) enables eligible taxpayers to calculate their taxes on estimated profits or income. Professionals with annual gross receipt of up to Rs. 50 lakhs are eligible for the PTS scheme under Section 44ADA of the IT Act.Professionals from which fields are eligible for this taxation scheme? How is the taxable income computed? Take a look-

The primary purpose of the PTS scheme is to make taxation easier for eligible professionals. By allowing them to calculate taxes on an estimated income, the scheme helps reduce the compliance burden while also facilitating ease of business.In the past, only small businesses were eligible for the PTS scheme. Section 44ADA was introduced in Financial Act 2017 to also make this taxation scheme available for small professionals.

Section 44AA mentions all the fields from which professionals can opt for the PTS scheme if their annual gross receipt is up to Rs. 50 lakhs. Here is a list of eligible professions-

• Architecture
• Accountancy
• Authorized Representative
• Engineering
• Interior decoration
• Legal
• Medical
• Technical Consultancy
• Information Technology Professional
• Company Secretary
• Film Artists

The taxable income of eligible professionals is computed as 50% of their gross receipts. Taxpayers are allowed to declare income of more than 50%. For instance, if the annual gross receipt of a professional is Rs. 30 lakhs in a financial year, the presumptive income will be computed as Rs. 15 lakhs or more. However, it cannot be lower than Rs. 15 lakhs.The tax rate on the generated income will be at marginal tax rate slabs. Also, professionals taking advantage of the PTS scheme cannot claim any depreciation, deductions, or expenses against the presumptive income.

Eligible professionals opting for PTS are not required to maintain books or get their accounts audited.However, if professionals with a gross receipt of less than Rs. 50 lakhs in a financial year wants to declare their profits below 50% of their gross receipt; they cannot take advantage of PTS. In such cases, the taxpayer will have to maintain their books and also get their accounts audited.

Professionals opting for presumptive tax scheme are only required to pay their advance taxes once a year and not in all the four quarters of a financial year. The advance tax should be paid once on or before 15th March of every financial year.If the professional cannot pay advance tax in one instalment before the due date, interest as per Section 234C of the IT Act will be applicable.

PTS is an excellent way for eligible professionals to reduce their compliance burden. In many cases, it can also help reduce your taxes. The scheme also eliminates the need for you to main books or get them audited.Consult a tax professional to know more and take maximum advantage of this scheme.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.