persumptive tax for professional-including receivables for taxable income

[Balaji G]

a professional filing itr4 under persumptive tax has an issue. his payments for the FY is partly deferred to next year by the company and they have remiitted and declared only the paid portion in the FY and 10% tds effected.

The option before the assessee is to go with the actual receipts and file the return. But he will be having a problem next year with the arrears being paid with TDS which he can not get exemption u/s 89(1) (as it is not a salary) and has to pay his taxes under higher slab. his actual tax outflow will significantly increase because of the arrears amount.

If he decides to go with accrual basis and books all the due income in the current year, in the subsequent year the disclosed income from the company and TDS will be on the higher amount than what he will be filing as income(less the previous year due received on which he has already declared the income paid tax). if it can be done the second option is the best for him. kindly advise

[Padmanathan KV]

Why don't you consider asking the deductor to deduct the entire TDS in the current year itself (mostly, the deductor would also have booked the entire expenses this year and payment deferred would only be payable in the balance sheet).

[VENU K]

In my opinion you cannot keep changing your method of accounting to suit your requirements from year to year. It has to be adopted in a consistent basis . Considering this fact you have to book your income on the basis of the method of income recognition regularly employed by you. You are not supposed to change  your method of accounting to suit the amount and manner of tax deduction.

So reporting the income as per the method of income adopted by you consistently is mandatory. If there is an issue while  processing by CPC, you can possibly apply for rectification to the Assessing Officer. In ITR , I suppose, there is a provision not to claim the entire TDS in the current year itself and keep it pending for next year.

AI Summary

Presumptive tax for professionals: choose consistent accounting method to manage deferred fees and TDS timing consequences. A professional under presumptive taxation must choose between reporting income on an actual receipts basis-matching taxable income to cash received but risking higher tax on subsequent arrears-or recognising receivables on an accrual basis and declaring the full due income in the year it arises. Advisers stress maintaining the method of accounting consistently, suggest asking the deductor to deduct TDS on the full amount in the current year where feasible, and indicate rectification with the assessing officer if TDS credit or processing issues occur.