Income Tax: Deduction of expenses deemed to be claimed under presumptive tax scheme

November 11, 2020 1:45 AM

Section 194C governs deduction of TDS on payment to contractors and not professionals.

However, all expenses shall be deemed to have been allowed and no further deduction of any expense shall be permissible.However, all expenses shall be deemed to have been allowed and no further deduction of any expense shall be permissible.

By Chirag Nangia

I have pension and interest income. Last year I joined a bank on a contract basis and it paid remuneration under Section 194 C. This income is less than Rs 50 lakh. Can I claim expenses under Section 44ADA for this income?
—YK Chugh
We are assuming that you are engaged in a profession eligible for computation of profits on a presumptive basis. If gross receipts from such profess-ion do not exceed Rs 50 lakh, you may declare income on presumptive basis under Section 44 ADA. A sum equal to 50% of the total gross receipts shall be deemed as ‘profits and gains from business or profession’. However, all expenses shall be deemed to have been allowed and no further deduction of any expense shall be permissible. Therefore, you shall not be entitled to claim deduction.

Section 194C governs deduction of TDS on payment to contractors and not professionals. If your income does not qualify as ‘professional’ income, you may declare income on presumptive basis under Section 44AD, wherein 8% of total turnover or gross receipts shall be deemed as profits and gains from business (6% if turnover or gross receipts are received by way of account payee cheque or account payee bank draft or use of electronic clearing system through a bank account). In this case too, you shall not be entitled to claim deduction of expenses. A person carrying on a profession or agency business or earning income in the nature of commission or brokerage is not entitled to claim the benefit of Section 44AD.

I intend to gift all my share holdings to my son who is unemployed and doesn’t file any return. What is the best way to transfer the holdings to enable him to do share trading and what shall be his tax liabilities?
—Rajinder Pal Singh
From an income tax perspective, gifting moveable property (shares in your case) to relatives does not trigger taxation. Therefore, you may transfer shares to your son without attracting any tax liability in his hands. Further, when he finally sells these shares received as a gift, he shall be entitled to include in his period of holding, the period for which the shares were held by you. Moreover, the cost for which you acquired the shares may be treated as your son’s cost of acquisition.

The writer is director, Nangia Andersen Consulting. Send your queries to fepersonalfinance@expressindia.com

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