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Jul 13, 2024
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Budget 2024 : Need to re-think the profit margin under presumptive tax scheme for Professionals
The presumptive tax scheme enables a wide variety of professionals to offer 50% of their gross receipts to Income-tax (I-T) and be absolved of a range of compliance obligations, like maintenance of books of accounts.
Only those whose gross receipts from profession is Rs. 50 lakh or less in a financial year, can opt for the provisions of section 44ADA.
This limit of Rs. 50 lakh is increased to Rs. 75 lakh, provided 95% of the receipts are through recognised banking channels.
Need to reduce the profit percentage:
There is a dire need for amendment of this section. As The Chamber of Tax Consultants (CTC) in its pre-budget memorandum has pointed out: The net income of any professional cannot be as high as 50% considering the present-day overheads which are necessary to earn the income. Rent cost, staff cost and various other costs are increasing year after year and normally a professional will be able to earn net income of about 25 to 30% of the gross receipts. Prescribing a higher percentage for the purpose of presumptive tax scheme is a discouraging factor for any taxpayer to avail the benefit of the presumptive tax scheme. CTC has recommended that the profit percentage be reduced to 25%.
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