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

AI Summary

Presumptive Taxation Dilemma: Deferred Payments and TDS Impact on ITR-4 Filings; Consider Consistent Accounting Method. A professional using presumptive taxation under ITR-4 faces a dilemma with deferred payments affecting taxable income. Deferred payments are only partially declared by the company, with 10% TDS applied. If reported on an accrual basis, future income declarations and TDS will be higher than actual income, complicating tax filings. One suggestion is to request the deductor to apply full TDS in the current year. Another advises maintaining a consistent accounting method, suggesting rectification applications if issues arise. The professional is advised to consistently apply their chosen income recognition method and manage TDS claims accordingly.