Taxation for Doctors in practice

Day before yesterday I met one of my school friends after long time.

And I was glad to know that she is an ophthalmologist by profession. When she came to know that I am a Chartered Accountant by profession, she couldn’t wait to ask me about filing of income tax returns.

I explained all to her and this made me to write this article for my all friends/ connections who are doctors/ medical professionals.

Hello doctors (a GOD on the Earth)!!!

Being a doctor, balancing a business decisions, financial obligations and patient care is a constant struggle.

On top of it, ACCOUNTING and TAXATION!!!

I am sure, understanding following points will make you feel relaxed regarding your worries about filing of tax returns.

1.?????Who should file Income Tax Return?

? ?Whose total income is more than ? 2,50,000/- in a financial year.

2.?????Options available to doctors

2 options.

i.????????????????Actual receipts – Actual Expenses = Actual Net profit/Loss?- Pay tax on it.

ii.???????????????Presumptive taxation?

3.?????What is presumptive taxation?

Instead of calculating Actual profit, profit is to be presumed at the rate of 50% of your receipts

4.?????Who can opt for presumptive taxation?

Only Resident Individuals or HUF having annual receipts of ? 50,00,000/- or less.

Companies cannot opt for this option.

5.?????Books maintenance

If your Gross receipts exceeds ? 1,50,000/- per annum in each of the past 3 years following records you have to maintain for the period of 8 years from the end of the relevant assessment year -

i.????????????????Cash book

ii.???????????????Journal (if mercantile System)

iii.???????????????Ledger

iv.??????????????Bills (Carbon Copies) : For the Value exceeding ? 25/-

v.???????????????Purchase bills or receipts in respect of expenditure.

If expenditure does not exceeds ? 50/- - Payment voucher

vi.??????????????A daily case register in From No. 3C

vii.????????????An inventory as on 1st and last day of the previous year

Of the stock of drugs, medicines and other consumable accessories used.

6.?????Benefit of presumptive taxation

i.????????????????No need to maintain above mentioned books. ( but it is wise to keep at least some record of your transactions)

ii.???????????????No need to pay advance tax in quarterly installments. Pay only on 15th March of the Financial year.

iii.??????????????Even if not paid by 15th of March of the Financial year, penal interest would be 1% per month until you file the return.

7.?????Audit

2 situations:

i.????????????????When receipts exceeds ? 50,00,000/- in a Financial Year.

ii.???????????????If receipts are under ? 50,00,000/- but profit is less than 50% of total receipts.

Penalty: for not complying with Tax Audit - ? 1,50,000/- or 0.5% of Gross receipts – whichever is lower.?

8.?????Profits higher than 50% of receipts

In the presumptive taxation you CAN declare profit more than 50% of Receipts.

9.?? Profits less than 50% of receipts

If profit is less than 50% of the gross receipts, but total income is taxable (exceeds 2.5L) You need to maintain Books and get them audited.

10.??Income from the sources other than Practice

You may have income from other sources such as –

Medicine shop

Nursing home

Authorship

Taking lectures

Contributing articles

Presumptive tax will be available only to your income earned directly due to your profession.

Other income Is to be reported as a business income by claiming actual expenses.

In such case book keeping and audit may apply to business activity while presumptive income will remain exempt from these.

11.??No of years for which this option can be followed

?????No such restrictions. Can be withdrawn any time and opt in again anytime

12.??Tax return form

2 cases

i.????????????????ITR – 4 – Presumptive income + Salary Income + Income from 1 House property.

ii.???????????????ITR – 3 - ?Above + Income from more than 1 House Property + Capital Gain Income

13.??Due dates

i.?????Non Audit Case – ????????????31st July of the Year

Extended to 31St December, 2021 for the FY 20-21

?????????ii. Audit case –?????????????????????30th September of the Year

??????????????? Extended to 15th February, 2022 for the FY 20-21