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How to calculate income tax?

S ELAVARASI (ACCOUNTANT) (2975 Points)

30 January 2018

Dear Sir / Madam.,

Thanks in Advance... We are received a bank statment from a Building contractor... His statments...

Total Bank Deposits (01/04/2016 to 31/03/2017) - Rs. 83,00,000...

The structure of deposits like

From Sons - Rs. 315,700

From Jewell Loan - Rs. 789,000

Cash Deposits (It's withdrawal and Deposits) - Rs. 580,000

Some of received from Friends and refunded* - Rs. 475,000 = Total Rs. 21,59,700 /-

(Total Deposits Rs. 83,00,000 - Rs. 21,59,700 = Rs. 61,40,300)

The Actual Total Income is Rs. 61,40,300.... As per my calculation (with the contractor) I calculate the income Rs. 61,40,300.

Is this correct or Not...?

Please give your valuable suggestions...

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12 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 30 January 2018

1. Hope the deposits of 83 lakhs are through Cheque/pay order.

2. No contractor earns around 60 lakhs from total receipts 83 lakhs. These are just total receipts.

What about expenditures over materials and labour? Still Payable?

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S ELAVARASI (ACCOUNTANT) (2975 Points)
Replied 30 January 2018

Sir.,

Thank you for the reply... As per above way Total credits Rs. 83 lakhs.

It's included Cash deposit by self Rs. 580,000 (Cash Deposit Machine), His son transferred Rs. 315,700, Jewell loan (hypothecate) and it's transferred from JL a/c to SB a/c Rs. 789,000 and Received one friend and Pay it to another Friend Rs. 475,000...

All other (Balance Rs. 60l) received Check, DD & Online Transfer....

Then which amount will be taken as Business income...??

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 30 January 2018

Business income can be arrived only after deducting expenditures......... Do you have bills of material purchased.......... whether they have been paid? What are the labour charges paid?

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S ELAVARASI (ACCOUNTANT) (2975 Points)
Replied 30 January 2018

Thank You Sir...

Expenditure around 70L... I am preparing for the accounts.

But, I'm not prepared fully the accounts till the time. In case I will file 8% profit then Which amount I will take as Receipts of Income... So, As per my doubt is which amount is his receipts...

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 30 January 2018

Law on how revenue should be recognized by a developer of property under the “percentage completion method” in the light of Accounting Standards AS-1, AS-7 & AS-9, the Guidance Note on Accounting for Real Estate Transactions issued by the ICAI and several judgements on the issue should be checked.

As per AS 7, the recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed

Anyway, Check the bills raised during the period......... there may be some amount receivable.....

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S ELAVARASI (ACCOUNTANT) (2975 Points)
Replied 30 January 2018

Sir.,

He don't have Raise any bills for his contracts. He doing building contract... He / I have only bank statemnt and some Purchase bills and Cash Payment Vouchers for given Salary/Wages/Labour

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 30 January 2018

He is doing building contract, and the builder would pay him only based on bills raised by him!!!

Anyway, get architect's certificate for the gross amount of works done by the contractor....

(the amount of work done is to be justified while adopting sec 44AD)

S ELAVARASI (ACCOUNTANT) (2975 Points)
Replied 30 January 2018

Sir.,

He is working as self. It means no more adopt to any builder. He is taken Job from Individual and Own contract. Completethe work with some labours like mason, Pitter for wages based..

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 30 January 2018

OK.... Thats good. Means the total receipts as per the bank statement....... Add any amount receivable during the year......... Less any payment received of previous year....... will get you the total sell value........