Q. What is Presumptive Taxation?

For professionals & freelancers, the government has introduced a new scheme of presumptive Taxation (Section 44ADA). Professionals can file their Income-tax return declaring 50% of their gross receipts (which must be up to ?50 lakhs) income. After deducting the section 80 deductions, professionals need to pay tax on the total balance income. The creative professionals who are eligible to opt for this scheme are architectural professionals, interior decorators, advertisers or technical consultants.
If you receive foreign income from another country or client in your foreign bank account, even then, you will be taxed in India if you are an Indian resident.
Suppose you are paying taxes on your foreign income in that foreign country. Presumptive return is the way to claim tax relief on your taxed income while filing an Income tax return here. The amount which was taxed twice) in India and that particular foreign country should be revised under DTAA.
Presumptive taxation involves using indirect methods to compute tax liability. In presumptive returns, taxable income is assumed to calculate the income instead of actuals. Here, the professional is required to declare a given percentage of gross receipts of professional income as its income and pay a fixed percentage of it as tax. As per Finance Act 2016, professionals (as notified by CBDT) with gross receipts up to ?50 Lakhs from April 1st, 2016 to March 31st, 2017, can opt for presumptive taxation. Also applicable for all financials years after financials years 2016-17.

Q. What if you have a day job and do freelancing work on the side?

What is included in my Income as a Freelancer?

Any amount you receive against specified services that you provide to your clients is freelance income. It won't matter if your client is in India or abroad. Your taxable income will also include:
???? Salary Income- if you are in part-time employment.
???? House property Income- Renting your house generates rental income.
???? Capital Gain - If you trade in the share market or have gained from selling assets.
???? Other Sources Income- This will pertain to include interest received on FDs, lotteries etc.

Three Benefits to File Returns under Presumptive Tax

1. Easy to File: The tax form is much shorter and simpler as compared to a complex 30 pages ITR form for filing.
2. Save Money: Professionals can now file tax returns on their own instead of paying a tax consultant. Typically, consultants charge anywhere from Rs. 5000 – 15000 for such filings. Financy Anzalist offers the same service for much less.
3. Save Tax: Usually, professionals do not have much expenses to declare. By declaring 50% of income as profit and balance as expense, a lot of tax saving can be done.

Books of Accounts that are required to be maintained?

The books of account required to be maintained by the specified professionals have been specified in Rule 6F of the Income Tax Act, 1961. They are namely,
???? Journal,
???? Ledger,
???? Cashbook,
???? Original as well as carbon copies of bills issued and
???? The Payment vouchers.

But this requirement of maintenance of books is to be fulfilled if gross receipts of a person carrying on specified profession exceed Rs. 1,50,000. This limit is to be checked in all the three immediately preceding years. And in the case of a new profession, only if it is likely to exceed Rs.1,50,000 in the year of set up. In simple words, the books specified under Rule 6F are not required to be maintained only in the case of the following specified professionals:
???? Who are eligible to opt for section 44ADA.
???? Whose gross receipts do not exceed Rs. 1,50,000 and are also not eligible to opt for section 44ADA.