Tax Column

I am an individual and an interior designer. I have just started my practice. My gross income or fees during the financial year is ₹4,200,000. I was told that there is a scheme under the Income Tax Act where tax can be paid at a lesser rate. Could you explain and clarify?

Yes, under Section 44 ABA of the Income Tax Act, an individual or a partnership firm engaged in a profession defined under the Income Tax Act and whose total gross receipts do not exceed ₹50,00,000 in the previous financial year on account of such a profession can offer income at 50 per cent of the gross income. For example, in your case, your income amount is ₹42,00,000 which is less than ₹50,00,000 and therefore you will get a deduction of 50 per cent i.e. ₹21,00,000- and you will pay tax only on the balance amount. The law thus gives you a 50 per cent deemed deduction without marinating books of accounts, vouchers, invoices, etc. However, the upper limit is only ₹50,00,000 if the fees include cash receipts of more than 5 per cent. If your fees do not exceed cash fees of 5 per cent, the upper limit is ₹75,00,000.