In a major relief for professionals and freelancers earning less than `50 lakh per annum, Finance Minister Arun Jaitley has brought them under the ambit of presumptive taxation. This segment of taxpayers will henceforth have to declare profit and pay taxes at a pre-determined rate of 50% of gross receipts, doing away with the need to maintain books, track income or conduct audits.
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This benefit was earlier available only to individual small businesses, Hindu Undivided Families (HUFs) and partnership firms with less than `1 crore turnover under Section 44AD of the Income Tax Act. The net income of a business was estimated to be 8% of gross receipts. Earlier this year, the Easwar committee had recommended introduction of a presumptive income scheme for professionals. However, the committee had suggested a higher income threshold of `1 crore and a lower tax rate of 33.3% of the total receipts in the previous year. “Professionals will now be able to file taxes via a simpler ITR-4S form instead of the lengthier ITR 4,“ said Archit Gupta, founder, ClearTax.in. However, people who earn from commissions or brokerage, such as insurance agents or wealth advisers, are still not eligible for the scheme. Also, individuals who own more than one home will have to use ITR4 for tax filing. The finance minister has also amended the provisions of Section 44AD and raised the threshold for presumptive taxation from `1 crore to `2 crore.
Now businesses with an annual turnover of less than or equal to `2 crore too will be able to file the threepage ITR 4S. However, there are conditions. If the taxpayer opts for the presumptive taxation scheme, the person has to remain in it for five years. If he does not offer the income as per the said scheme in any of the five years, he shall not be eligible to claim the benefit under the scheme for the next five years.
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