B S BHMRA (Managing Partner) (102 Points)
30 January 2012Dear Friends,
Hello!
I am back once again with queries on TDS, which are as follows:
1. Can an individual doing business in online commodity trading under his personal name (without forming a firm) employ employees on salary or contract basis and show the same under expenses a/c while filing his IT returns? What other expenses are allowed to be shown in the returns?
2. Is TDS to be deducted from the salary being paid to employees, if yes, how much?
Thanking you all,
Yours truly,
B S Bhmra
Vignesh Killur
(Articled Assistant)
(1671 Points)
Replied 30 January 2012
Hello Sir!
The answers to the queries are as follows:
1. If an individual carries on any business under his personal name, then the profits from such business shall be assessed under the head " Profits & gains from Business or Profession". In this particular head of Income, the assessee can claim all incidental expenses relating to earning his Income. That means if he pays salary to employees, Rent fro premises, Printing & Stationery, Telephone, Water & Electricity charges of business premises, and all other expenses which are related to the business are allowed as Deduction. That means such expenses can be deducted from his Gross Receipts/Turnover/ Sales.
2. TDS on Employees is to be deducted if the Salary paid to employees exceeds a specified limit. For the Financial year 2011-12 (AY 2012-13) that limit is fixed at Rs. 180,000/- for Male assessees below 60 years. But at the same time the employer can also consider the Other Incomes of the assessee. He can also consider the losses sustained by the assessee except loss from business. For this relevant documents have to be asked from each of the employees. In short tax has to be deducted from Employees by Considering each individuals tax bracket.
For example if you are paying a Salary of Rs. 50,000 p.m to Mr. X, the his annual Salary will be Rs. 600,000. Lets assume he has specified savings of Rs. 75,000. Then his tax will be assessed as follows: First 180,000 - Exempt, 180,000-500,000 @ 10% i.e Rs. 32,000/-. & 500.000-525.000 @ 20% i.e Rs. 5000. Therefore ( 32000+5000) = 37,000. Add Education cess @ 3% to that 37000*3%=1,110/-
So employer will have to Deduct tax of Rs. 38,110/- yearly. That comes to Rs. 3,176 p.m
However note that an individual or HUF whose turnover is below 60 lakhs has no obligation to deduct tax at source.
Regards,
Viggi
B S BHMRA
(Managing Partner)
(102 Points)
Replied 31 January 2012
Hello Mr Viggi,
While thanking you for the prompt response to my query, I would more thankful, if you could also clarify if the expenses such rent, electricity etc., can be claimed, even if the individual is doing business from his residence cum office?
Thanking you sir,
Yours truly,
B S Bhmra
Vignesh Killur
(Articled Assistant)
(1671 Points)
Replied 01 February 2012
Yes. If the individual carries on business from his residence, proportionate expenses which are related to his business will be allowed. It is as if a a Car is used for both personal as well as office use. Proportionate expenses which are related to business is allowed. Same is with electricity. If out of 3,000 kms, 1500 kms is for personal use, then that portion of motor car expenses will be disallowed.
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