Hi Vivek! I am a software engineer working in Bengaluru. For FY 2023-24, my salary is 20 Lakhs whereas I have earning of 74 Lakhs from IT Consultancy. Do I require tax audit or can I simply apply presumptive taxation on 74 Lakhs as per 44AD and state my final income as 57 Lakhs (20L + 37L) and pay taxes as per tax slab on it. I do have GSTIN and file GST as professional income is more than 20L.

Ans: As per Section 44AA, of income tax act 1961, you need to maintain books of accounts compulsorily. You cannot be covered under the presumptive taxation scheme as your income is above Rs 50 lakh.Since your gross receipts out of profession exceeds Rs 5o lakh, Tax audit needs to be done. As a consultant, your income is taxed under the head 'Profits and Business or Profession'.

You are allowed to claim expenses on actual basis which have been incurred by you in connection with your work.

You may opt for traditional tax slab or new tax regime (without deductions) based on what works better for you.

Ans: Hi Prash
As GST and direct tax option of presumptive tax are two separate taxes, the threshold limit of the requirement of registration under GST would be applicable once you cross the Rs. 20 Lakh mark.

Ans: Dear Rakesh, Basis your question, let us unbundle the situation , one after the other.

1) I have understood that you are not an "employee" of the company and so, provisions of "Income under the head Salaries" under the provisions of the Income - Tax Act, 1961 of India, would not be attracted. And so, your income won't fall under the head salaries.

2) Again, as mentioned by you, the TDS is deducted under @10.00% on consultancy fees (under provisions of Sec 194J ) and also on free accommodation.

Section 194 R is a newly inserted section, and it is applicable from July 1, 2022. The wording of this section reads, ... It mandates a person responsible for providing any benefit or perquisite to a resident to deduct tax at source at a rate of 10% of the value or aggregate value of such benefit or perquisite before providing it to the resident......

.......The provision of this section shall not apply to an individual or a Hindu Undivided Family (HUF) whose total turnover/sales/receipt doesn’t exceed INR 1 crore in case of business or INR 50 lakh in case of profession....

TDS deducted under provisions of Sec 194R itself infer that, you are not an employee of the company, else the TDS of such "benefits" would have been deducted under provisons of "Salaries".

In most cases, the deductor of the tax may not be aware about the actual income of yours ( since you are a lawyer, TDS @ 10.00% under section 194R would not have been deducted, if the income from profession is less than ₹50.00 lacs per annum. The deductor might felt to comply with these provisions and may have deducted the TDS AT 10.00% }

To summarise, as explained above,

a. Your income from consultancy fees and as consultant is liable to be taxed under the provisions of "Income from Business Profession" { Section 28 of Income tax Act, 1961}, considering the fact you are a legal professional and getting consultancy fees is your main source of income, under normal course of business.

b. You can claim other legitimate expenses against this income, which you might have incurred to earn this income, as legitimate deduction. Eg. conveyance expenses, stationery expenses, salary payment to your staff,electricity bill, etc.

3) Coming to GST provisions:

There a concept of reverse charge in case of GST , which is applicable to certain class of service providers and legal professional is one of them. As per my reading of the law, if legal services are provided to a corporate body with turnover exceeding Rs 40 lakh, then GST is applicable on reverse charge basis. You are requested to verify, if the consultancy provided by you as consultant to the receiver of the serivices is a corporate & whoes turnover exceeds ₹40.00 Lacs, then, then, it would be the responsibility of the receiver of the services, to honour the GST liability arriving due to payment of consultancy fees to you , as a legal professional, under reverse charge mechanism & if the turnover of such service recipient, is less than ₹40.00 Lacs & if the total receipt under business professional of the service provider exceeds ₹20.00 Lacs, then it is mandatory to obtain GST registration and the onus to collect the GST from the service receiver lies with the servicer provider and to pay to the exchequer.

In either case, GST registration is mandatory, once the turnover exceeds ₹20.00 Lacs in a particular financial year.

Ans: If you have income above 7 lacs, you will not be eligible for tax rebate and slab rate will apply