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Service tax : business + professional income

Shams (Consultant) (157 Points)

04 July 2012

Hello Everyone!

Thank you so much for taking time to look into my query.

I am a partner in a business and so I have business income. Apart from that, I have freelance professional income (consultant), not related to the business.

Now, my question is :

1. If my business income is 3 Lac and Professional income (service related) is 8 Lac, is service tax applicable on my income, as the Service related income is only 8 Lac (less then 10 Lac limit).

2. If my business income is 30 Thousand (or nil) and Professional income (service related) is 8 Lac and I get 3 Lac interest on my Fixed Deposits in banks, is Service tax applicable on me ... as Service related income is only 8 Lac (less then 10 Lac limit).

Thanks again .. and looking forward to your responses.

Take care,

Shams

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5 Replies

pahuja (C.A Final Student ) (472 Points)
Replied 04 July 2012

HI Shams

In your Case, Service Tax is not applicable in any condition.

Basically Service Tax is applicable as per sec 66 of finance act 1994, your professional income(not any other income like business income or income through fixed deposit) through rendering the services should be greater then or equal to qualifying amount i.e Rs. 10 Lacs.

Your Interest from fixed Deposit is Taxable under the basket of Other Sources.

Thanks & Regards

Suraj Pahuja

pahujasurajandassociates @ gmail.com

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Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 05 July 2012

Service tax will not be applicable on the same but as per my understanding your share of profit will be also included as it is not excluded from the definition of service. So, the situation is not very clear untill some clarifications are provide by the CBEC.

Shams (Consultant) (157 Points)
Replied 06 July 2012

Thank you so much Suraj and Ajit ... but honestly, I am still confused ... as both of you have given different answers ..

I would be grateful if you or anyone else can put more light on this ...

Am I in a rare situation .. because I thought that this would be a common situation faced by many people ..

Thank you,

Shams

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 07 July 2012

The situation is quite clear as if your remuneration and share of profit is taxable under the head Salary under the Income Tax Act, and to that affect you receive Form -16 and not form 16A, then the said amount will not be considered as service. But incase you receive form-16A then it will be covered under the amended definition of service. Hope now you are clear on the said query.