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 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.