Both Self Drugging & Self Tax Planning are not advisable.
Doctor is one of noble professional in the society & helps the society to be a healthy. But this professional will not be spared & will be taxed for the income generated from his profession.
“The hardest thing in the world to understand is the income tax.” — Albert Einstein, Physicist.
But this small document is an effort to give the doctors about overall picture of tax (which Einstein said is hard). It aims to help doctors to have insight knowledge on income tax. This document will assist them on to have the idea of tax/accounts/audit & to avoid unnecessary payment of tax, interest & penalty.
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SI. |
Subject |
Explanation |
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1. |
Accounts |
Doctor is also one of the professional who is covered under section 44AA of income tax act, which requires maintaining books of accounts if the doctor is in receipt of Fee (gross fee collection) of more than Rs. 1,50,000/- (one lakh and fifty thousand) during the year. This is mandatory as per the income tax act. Penalty for non maintenance of books of accounts is Rs.25,000.(As Per Section-271A of Income Tax Act) |
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2. |
Accounts |
Rule 6F of Income Tax Rules specifies that few books of accounts has to be maintained – 1) Cash book , Journal, Ledger, 2) Carbon copies of bills (more than Rs. 25) and original bills of expenditure made, daily register and inventory (of Medicines). These documents and accounts should be preserved for 6 years from the end of relevant Assessment Year. |
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3. |
Audit |
If practicing doctor is having gross fee collection of Rs. 10,00,000 (ten lakhs) or more (15 laks For AY 2011-12) during the previous year (April to March), then books of accounts should be audited by a qualified practicing Chartered Accountant. Penalty for not having audit is---0.5% of the receipts or Rs. 100,000, whichever is less. (As Per section 271B of income tax Act) |
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4. |
Tax |
Section 139 of Income Tax Act requires to file the Income Tax return every year on or before 31st July (Non- Audit Cases i.e. gross fee collection is less than Rs.15,00,000/-) or 30th September (Audit cases i.e. gross fee collection is more than Rs.15,00,000/-) |
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5. |
Tax |
If Annual Tax liability is more than Rs. 10,000, then tax is required to be paid in advance. It can be called as self TDS. TDS is the tax which employee will pay every month from salary. But for professionals, the due dates for advance tax are – 15th September, 15th December and 15th March. They are required to pay 30%, 30% and 40% of Annual tax liability for the forth coming assessment year. (The advance tax has to be paid on estimate basis). Ex. If the tax liability estimated is Rs.20,000/- ,then the due dates for paying tax liability are 1) Rs.6,000/- on or before 15th September, 2) Rs.6,000/- on or before 15th December & 3) Balance Rs.8,000/- on or before 15thMarch. |
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6. |
Interest |
If Advance tax is not paid within the due date as specified above interest @ 1% per month till the next due date is payable. (As Per Section-234C of Income Tax Act). If 100% of tax is not paid in advance, interest @ 1% per month is payable from 1st April till the date of payment on the balance tax due. (As Per Section-234B of Income Tax Act). If 100% of tax is not paid in advance and return is not filed in time, interest @ 1% per month is payable till the date of filling the return of Income by paying 100% of tax due on the return. (As Per Section-234A of Income Tax Act). |
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7. |
Hand Loan Taken |
As Per Sec. 269SS of Income Tax Act, “No person shall take or accept from any other person any loan otherwise than Account payee cheque or account Payee Bank Draft if amount of such loan is Rs.20,000/- or more.” If already any loan is taken during current year or any earlier year and/or interest accrued there on and any loan is accepted during the year, aggregate amount of such loan is Rs.20,000/- or more, then also the Account Payee Cheque or Account Payee Bank Draft is must for such Loan. |
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8.
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Hand Loan Repayment |
As Per Sec. 269T of Income Tax Act, “In case the loan balance along with the interest there on, on the date of repayment is Rs.20,000/- or more, then such loan has to be repaid through the Account Payee Cheque or Account Payee Bank Draft” |
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9. |
Payments to Relatives |
Nobody (including Income Tax Officer) will stop doctors paying salary or professional payment to spouse/relative for any service availed, if it’s reasonable. EX: 1.If a CA is undertaking the assignment of account writing for Rs.18,000/-, and the doctor shows professional payment of Rs.50, 000/- to his B.Com. Passed spouse. Such contention is not tenable as the payment is more in the nature of relationship. 2. If spouse of a Doctor is a nurse or held office superintendent and salary to the spouse is Rs. 20,000/- p.m. but the salary to same kind of job in market is Rs.5,000/- then payment of Rs.20,000/- is not tenable. |
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10. |
Business in the name of Spouse. (Unless Professionally Qualified).
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1. Running Medical Shop in the name of spouse. Purchasing the medicines in the name of doctor, and selling in the name of spouse and diverting the income of doctor is another tactics of avoiding tax. Such contention is not tenable, unless the spouse holds pharmaceutical qualification or the spouse of doctor employs any such graduate and the medicines are purchased in the name of such graduate and sold in his name. 2. Running diagnostic center in the name of spouse. Unless the spouse is pathological graduate or employs any such graduate for carrying out the diagnostic center then the contention of diverting the income to spouse can’t be taken. 3. Other Incidental Business in the name of spouse. Unless the spouse has a professional qualification to do the business or employs any such graduate for carrying out the incidental work of doctor, the contention of diverting the income to spouse can’t be taken. |
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11. |
Payments in excess of Rs.20,000/- |
If any expenditures like Medicine Bill, Vehicle Maintenance and such other Payments are claimed as expenditure while computing the income, are to be mandatory by Account Payee Cheque or Account Payee Bank Draft, if the payment exceeds Rs.20,000/-. (As Per Sec. 40A(3) of Income Tax Act) |
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12. |
Savings / Investments |
As known to everyone, tax can be saved through investing the amount in the eligible investments to the tune of Rs.1,00,000/-. The investments are like Insurance premium, House loan principal repayment & Eligible Mutual Funds.etc., |
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13. . |
MediClaim Policy Payments |
Doctors also can purchase these policies and get the premium deducted from their total income up to Rs.15, 000/- on the life of spouse, Children and parents- u/s 80D. This deduction is in addition to Rs.1,00,000/- u/s 80C. As Per Section 80D “ the deduction is allowed only if Premium is paid through the account payee cheque, demand draft or through the credit card or debit card.(CASH PAYMENTS ARE NOT ALLOWED). |
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14. |
Donations |
No charitable donations to N.G.O.’s will give 100% tax benefit. Tax saving from these donations varies from 5%, 10% or 15% depending on your tax slab rate. For some specified donations Tax savings varies 10%, 20% or 30% depending on your tax slab rate. Ex. If you donate Rs.100/-, you will get the maximum tax saving of Rs.15. |
The following documents are required to be maintained:
1. Cash receipts and / or Fee Collection Register for Fee Collection.
2. Expenditure details – Accounts Writing Fees, Bank Charges, Clinic Rent, Conference Fees Payment, Electricity Bills, Interest on Loan, Insurance (on Vehicle or Indemnity Insurance), IMA Fees Payment, Medicines, Mobile Bills or Recharge Currency, News Papers & Periodicals for Hospitals, Printing & Stationary, Professional Payments (CA’s or Lawyers), Professional Tax Payment Challan, Pooja Expenses of Hospital (if any), Travelling & Boarding Charges (Bus, Train or Air Tickets, & Loading & Hotel Bills), Vehicle Maintenance (Petrol Bills & Service Bills), Salary payments to staff or such other type of expense made for office.
We advice for collection of bills for expenses made and file it.
3. Assets details – Any assets purchased of sold during year – Computer, Medical Equipment, Land & Building, Car, Flat etc. Please consult your CA whenever you have any intention to purchase. Keep the record of these – Date, Bills & Payment, etc.,
4. Investment Details – Shares, Bank FD, Mutual funds, Savings Bank, Recurring Deposit (Bank or Post office), Life Insurance.
5. Pass Book Details (Details on Bank OD if any).
6. Loan Details and repayment there of (Statement of Loan Repayment With the bifurcation of principle & interest portion in the installment).
Last note but not the least, Self Medicine is dangerous to health which doctor discourages to every patient. Even Self –Tax planning is not advisable, unless he/she is salaried person and salary is the one and only source of income.
"Taxes are what we pay for civilized society.'' — Oliver Wendell Holmes, Jr., U.S. Supreme Court Justice. Hope this document will help the doctors to plan tax than avoiding the tax.
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