Presumptive income

This query is : Resolved

JANGALA SRI HARSHA (Querist)
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18 December 2018 A person is working as a manager in a company. The company is deducting TDS u/s 194C.

Now how can we treat income in return i.e. salary or business income.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 December 2018 it will be treated as business income.

CA ALOK KUMAR

CA ALOK KUMAR (Expert)
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19 December 2018 Deduction of TDS U/s 194C denotes that there is contractual payment. If it was salary, then Tds is required to be deducted U/s192. For considering salary income, there must be employer employee relationship between the payer and payee. However in the present case, payer is deducting TDS U/s194C, so it will not be considered as Salary Income. So, it will fall under the Income Head "Profit & Gain from Business and Profession" and taxable as Business Income. For further clarifications, you may logon to www.wealth4india.com OR www.gstkendra.com. You may send email to info@wealth4india.com or Call @9266242424.

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Z (Expert)
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19 December 2018 I do agree with the reasoning of CA A.K.Nandan to the extent "For considering salary income, there must be employer employee relationship between the payer and payee."

However, merely because the tax is deducted u/s 194C it would not be a piece of conclusive evidence that the income would fall under the head of profit & gains from business and profession.

The employer-employee relationship must be ascertained.

According to S.196 &197, the terms and conditions of appointment and remuneration payable should be approved by the Board of Directors at a meeting. We must ascertain the terms and also consider the board resolution and minutes of those meetings to determine whether it is a contract of service or a contract for service.

Many a time tax is deducted under the wrong section. The income of the assessee should not change the head according to the section under which the tax is deducted but should be determined independently by applying the provisions of the Act. If a deduction of tax is under the wrong section then TDS return needs to be rectified and one should not alter the ITR on the basis of TDS return.

Since the title of your query is "presumptive income", I suppose you are trying to avail the benefit u/s 44ADA, which is possible only if the income falls under the head of "profits and gains from business and profession" & is not hit by S.15 (i.e Salary)

If the income of the manager is coming u/h of "profits and gains from business and profession", then it must also be covered u/s 44AA for the manager to avail the benefit of S.44ADA (presumptive income)

Following persons are covered u/s 44AA
Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette

You must ascertain as to whether the manager is carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette.
If the answer is affirmative to both the questions, then only the manager can claim the benefit of presumptive taxation.

[ CA A.K.Nandan Sir & Nikhil Kaushik Sir, kindly enlighten me if am wrong.]

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