Presumptive Tax for Entrepreneurs: An Insightful Guide to E-Filing Income Tax Returns In addition to being harboured with the ease of e-filing of income tax return, presumptive taxation offers numerous other benefits too.

The recent revision in the limits of presumptive taxation under the umbrella of e filing of income tax return has brought about favourable changes for specific categories of income taxpayers, including MSMEs (Micro, Small, and Medium Enterprises) and Professionals. Under the revised regulations, the presumptive taxation limit for MSMEs has been raised to Rs. 3 crore, while for Professionals it is now set at INR. 75 lakhs. These revised limits are applicable under the condition that the total cash receipts of these taxpayers do not exceed 5% of their total receipts. However, if the cash receipts exceed this threshold, the previous limits of INR 2 crore for MSMEs and INR 50 lakh for Professionals will be applicable.

To avail of the benefits of presumptive taxation, eligible taxpayers are required to declare their profits at a rate of 8% for non-digital transactions or 6% for digital transactions, based on the relevant criteria. It is important to note that certain businesses are excluded from the scope of presumptive taxation.

Advantages of Presumptive Taxation under the umberalla of ITR filing

In addition to being harboured with the ease of e filing of income tax return, presumptive Taxation offers numerous other benefits to taxpayers.

1. Simplified Income Calculation: Under Section 44AD of the tax code, Presumptive Taxation provides a simplified income calculation method. In this framework, your net income is deemed to be 8% of your turnover, and you are required to pay taxes on this income. This approach eliminates the need for complex accounting procedures and provides a straightforward assessment method.
2. Digital Receipt Benefits: For those with receipts in digital (non-cash) form, an even more favourable provision exists. In such cases, only 6% of your receipts are considered your net income for tax purposes. This reduced percentage further enhances the tax benefits, encouraging digital transactions and promoting a cashless economy.
3. Ease of Record-Keeping: One significant advantage of Presumptive Taxation is the exemption from maintaining detailed accounting records. This relieves taxpayers from the burden of extensive financial documentation, simplifying their administrative responsibilities.
4. Audit Exemption: Another notable benefit is the exemption from mandatory accounting record audits. This provision eliminates the need for costly and time-consuming audits, reducing compliance burdens for taxpayers who opt for the Presumptive Taxation scheme.
5. Convenient Advance Tax Payment: While taxpayers are still required to pay advance tax, Presumptive Taxation offers a more convenient payment schedule. Instead of estimating income and paying taxes each quarter, taxpayers can fulfil their advance tax obligations by paying the entire amount before March 31. This approach provides greater flexibility and opportunities for financial planning.

ITR filing for various categories of professionals

Professions under the purview of Indian tax laws encompass a range of specialized fields, each with its own significance and tax considerations. These professions include engineering, legal practice, architecture, accounting, medicine, technical consulting, and interior decoration. Each profession is subject to specific tax regulations and obligations designed to address the unique nature of the profession

Professionals engaged in the specified professions mentioned above are obligated to maintain proper accounting records under Rule 6F of the Income Tax Rules. The requirement to maintain accounting records applies when the gross receipts of the professional exceed INR. 1.5 lakhs in any of the three preceding years. If a professional commences their practice in a specific year and their receipts exceed INR. 1.5 lakhs for that year, they must also maintain accounting records for that particular year. However, it is important to note that if an individual opts for a presumptive taxation scheme, which provides a simplified method of calculating taxable income based on a percentage of gross receipts, the need to maintain accounting records is no longer there.

Under rule 6F, the prescribed accounting records include

1. Cash Book: A record of all cash receipts and payments, providing an overview of the cash balance at the end of a day or month.

2. Journal: A comprehensive log of day-to-day transactions, capturing debits and credits when following the mercantile system of accounting.

3. Ledger: A book where entries from the journal are transferred, containing account details, and facilitating the preparation of financial statements at year-end.

4. Photocopies of bills or receipts should be retained if their value exceeds INR. 25.

5. Original bills or receipts must be kept if their value exceeds INR. 50.

Professionals in the medical field must maintain additional records, including:

1. Daily case registers, documenting patient details, fees received, services provided, and dates of receipt.
2. Stock details of medicines and other consumable items daily.

Compliance with these accounting requirements is crucial for professionals to ensure accurate financial reporting and fulfil their obligations under the Income Tax Rules.

E-filing of ITR for Freelancers

Freelancers, whether engaged in specified or non-specified professions, fall under the purview of regulations that apply to their full-time counterparts. These encompass the computation of taxable income, tax liability, maintenance of books of accounts, presumptive tax assessments, and return filing obligations.

1. Tax Deduction at Source (TDS) serves as a vigilant measure where tax is deducted by payers before making payments. The aim is to ensure that taxes are paid in advance, eliminating the need for recipients to fulfil their tax obligations independently. The recipient receives the net amount after the TDS deduction while adding the gross amount to their income. TDS is reconciled with the final tax liability, as it represents tax already deposited on the recipient's behalf, enabling a steady flow of revenue for the government.

1. Depreciation, an artistry in the realm of capital assets, occurs when an asset's usefulness extends beyond a year. Such assets are "capitalized," not immediately expensed upon acquisition. Instead, a fraction of their cost is gradually expensed over time, reducing taxable income. This recurring expense is known as depreciation, symbolizing the passage of time and wear and tear.

1. Advance Tax, also known as "pay as you earn" tax, requires individuals to make advance payments of income tax instead of a lump sum at the end of the year. These payments are made in installments according to due dates provided by the income tax department.

1. Form 26AS serves as a comprehensive repository of tax-related information associated with your PAN. It provides an overview of tax amounts received by the government against your PAN, including TDS, direct tax payments, refunds, and more. Familiarizing yourself with how to access and download your Form 26AS unlocks valuable insights into your tax profile.

Tax audit, as a component of ITR Filing, involves a comprehensive review of financial records by a Chartered Accountant. Auditing is mandatory if:

a. In the situation when gross receipts of professionals surpass INR 50 lakhs.

b. In the periphery of when business owners generate annual revenues exceeding INR 1 crore.

c. Under the scenarios when individuals opting for presumptive taxation declare income below the prescribed percentage, while at the same time, their total income transcends the basic exemption limit of INR 250,000.

In the intricate realm of freelancers' income, understanding these technical intricacies ensures financial harmony and adherence to the principles of fiscal governance.