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Whether you are into a noble profession of medicine or education, your income is taxable, if exceeds limit. In a society every job is important. It can’t be said since doctors are into noble professional their income should not be taxed. So according to Indian tax law, every Indian who are into profitable business or having taxable income that exceed the taxable limit must pay their taxes. And no profession is exempted from it unless one is into charitable work, but then it requires documented proofs to avail the exemption. Also, in that case any Indian engaged in charitable work can avail exemption subject to availability of proof according to the Indian taxation rules.

Here the discussion is about the doctors and the taxes on their income. If you are a doctor practicing in India, you should go through this article to understand the nitty-gritty of tax rules that applies on you.

Everything A Doctors should know about filing taxes

Doctors can handle seriously ailing patients but when it comes to manage taxes and filing them, it might look a daunting task to them. It is not necessary, but as observed most of the time most of the experts from other professions who are not tax experts, find accounting and taxation one of the toughest tasks.

Filing taxes on your income is one major worrying matter. The pointers discussed below can help you out in filing taxes and following the taxation processes with ease.

Everything Doctors Need to Know About Filing Taxes in India

Filing an income tax return

According to the Indian taxation law, any Indian citizen with total income of Rs. 2.5 lakh or above in one financial year is liable to taxes and can file an income tax return. In Indian taxation rules, income means, income from all the sources, be it monthly salary, professional incomes (apart from salary from job, if any), income earned through interests, income earned through rentals, business, private practice, self-employment, etc.

Preparing and Filing Income Tax Return

As discussed in the previous paragraphs, income tax returns should include earnings from all the sources of income. One can be a doctor yet might have other sources of incomes. Hence the income tax return must include all the sources. Whether salary earned from a job, income from private practice, rental income, incomes earned from FDs and sale of property or any share or any form of capital gain.

You can calculate taxation on income from private practice in two ways. Either you have presumptive calculation on taxation or consider your private practice as business and deduct your expense from original bills and the calculate on the basis of profits you made. If you have made loss then you may not have to pay taxes but better if you show you investments and expenses done on your practice.

After all your sources of income are calculated, you can then claim relief and deduction on your taxable incomes under section 80 and after claiming deduction, you will be liable to pay tax on the remaining income or profits.

Income Tax Rate for Doctors

It is a wrong perception that doctors and lawyers don’t have to pay taxes. Every Indian professional has to pay taxes if one has taxable income, be it any profession. The below slab shows how doctor needs to pay Income taxes. Below slabs show 3 assessment years and three age groups:

Tax Rate for Doctors for the Assessment Year 2018-19 – age must be less than 60 Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 2,50,000 Nil
2,50,000-5,00,000 5%
5,00,000-10,00,000 20%
Above 10,00,000 30%

Tax Rate for Doctors for the Assessment Year 2019-20 – age must be less than 60 Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 2,50,000 Nil
2,50,000-5,00,000 5%
5,00,000-10,00,000 20%
Above 10,00,000 30%

Tax Rate for Doctors for the Assessment Year 2018-19 – age must be between 60 and 80 Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 3,00,000 Nil
3,00,000-5,00,000 5%
5,00,000-10,00,000 20%
Above 10,00,000 30%

Tax Rate for Doctors for the Assessment Year 2019-20 – age must be between 60 and 80 Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 3,00,000 Nil
3,00,000-5,00,000 5%
5,00,000-10,00,000 20%
Above 10,00,000 30%

Income Tax Rate for Doctors for the Assessment Year 2018-19 – age must be 80+ Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 5,00,000 Nil
5,00,000-10,00,000 20%
Above 10,00,000s 30%

Income Tax Rate for Doctors for the Assessment Year 2019-20 – age should be 80+ Years

Income Range (in Rupees) Tax Rate (in %age)
Zero – 5,00,000 Nil
5,00,000 – 10,00,000 20%
Above 10,00,000s 30%

How is Filing Income Tax Return Beneficial for Doctors?

If you file income tax, then you can make claims on all deductions available to an individual. Also, doctors have more options to save taxes. Tax deductions can be claimed on various expenses that you make in your clinic or while in your practice:

  • Expenses made on paying salaries to nurses, assistant doctors, and other staff
  • Whatever expense you make to attend your professional conference
  • Expenses made on medical treatment consumables
  • Expenses made on overall repairs and maintenance related to your profession
  • Expenses on housekeeping
  • Expenses on rent of the building, parking, etc.
  • Expenses on electricity and maintenance of your clinic

All above expenses can be claimed for tax deduction

Due Date to File Income Tax Return

This depends on whether you will have to go through tax audits or not.

  • 31st July of every year is the due date for non-audit cases, according to present taxation rules
  • 30th September of every financial year is the due date in audit cases

Income Tax Return for Doctors

For the 2018-19 assessment year, that will assess the incomes earned in the FY 2017-18, doctors have to file Form ITR-3 or Form ITR-4-Sugam.

Form ITR-1

You will have to file ITR-1 if you are employed in a hospital or clinic and you income is the salary that you get from these places.

Form ITR-2

You will have to file ITR-2 Form if you are salaried and have earned capital gains. The income has to be attached to the related Financial Year.

Form ITR-3

You will have to fine ITR-3 form if you are running a proprietorship or own a clinic.

Form ITR-4-Sugam

ITR-4 Sugam is for doctors who has paid income tax under the presumptive taxation scheme.

Audit under Section 44AB

As a doctor if your gross fee collection exceeds Rs. 50 Lakhs then you should get your account audited by a professional CA or a taxation expert.

Penalties for Non-Compliance

  • If your books or accounts are not maintained in accordance to the taxation rules of India, then you will have to pay penalty of Rs 25,000 as per section 271A of the Income Tax Act.
  • If there is non-compliance with tax audit then penalty is Rs 1,50,000 or 1/2% of gross receipt, per section 271B of the Income Tax Act, whichever is low.

Presumptive taxation scheme, who can avail the scheme and how it can be used

When you presume your income and based on that make your taxation calculations it is called presumptive taxation. You may not know your actual income, but you can file your tax returns based on your presumptions, by assuming that your profit can be 50% of your bills received. But, only those with receipts of Rs. 50 lakhs or below on a financial year can choose for this presumptive taxation scheme.

What if Your Income Exceeds Rs. 50 Lakhs in a Financial Year?

If on a financial year, your annual billing is more than Rs. 50 Lakhs, you will have to report the income to the tax department and claim deductions on actual business expenses to calculate your profit or loss on your income. The profit from this income might be above or below 50% of the billing. By the way, all who choose presumptive taxes will not require to calculate or report actual income or profits earned from it. This presumptive taxation scheme was introduced for doctors in the financial year 2016-17 by the Modi Government. This scheme can be availed by individuals and Hindu Undivided Families (HUF), but if you are established as a company, you cannot male presumptions of your profits. And above all things and everything, to avail the scheme you will have to be a resident in India according to the Income Tax Act of India.

Benefits of presumptive taxation

This presumptive taxation scheme if opted by the tax payers then there is no need of maintaining accounts records and even audit is nor needed. The main objective of this taxation scheme is to encourage small tax payers file tax returns and make the entire process of filing ITR easier for them. However, to be on the safe side or for personal or future needs, it is always advisable you maintain all records of accounts and transactions of your business systematically. On the monetary side, you save around 20,000 without much effort by using this scheme, as you do not have to hire a taxation expert or auditor to process your ITR.

By using this taxation scheme, you will not have to pay advance tax through instalments. You will only have to pay your tax liabilities by 15th of March of the tax year which will serve your purpose. Also, by any chance if you miss to pay it by 15th March, there is nothing to worry, rather try paying it as early as possible for you. There is penalty interest which is applicable on all delayed tax payment, the rate of which is 1%. This is calculated month wise till the time tax payer does not file their return.

How important is your accounting and transactional records? Should you maintain records of your practice?

Keeping records of your business or practice is a very useful idea. You expect your patients to keep record of their health parameters and maintain medical history records. Similarly, records of accounting and transaction that took place in your business or practice too is mandatory. Year on year records can be helpful in many ways in your expansion plans or even during your complete renovation plan. The idea of maintaining records is not seen as compulsory by doctors but it is advisable to meet the complex taxation and other business processes. If you are generating bill of Rs. 1.5 lakhs and above through your practice every year for continuously past 3 years, then you are advised to maintain financial records.

The records that would be important for doctors according to Section 44AA with Rule 6F are:

Cash book – This maintains all your cash transaction on a day to day basis that includes payments and receipts. This record can display cash balance at the end of every day, or week or even every month. So now you know how much transactions you made through your private practice and based on that you can plan your expenses too.

Copies of bills – Also, keep records of all the bills or receipts of more than Rs.25. Can keep photocopies of these. But for all the expenditures done every original bill of expenses made of Rs. 50 or above should be kept safely.

Expenditure details – Clinical expenses, bank charges, clinic rent, conference fees, interests on loan if any, medicines, mobile bills, electricity bills, water bills, IMA fees, insurance newspapers, periodicals, travel cost, professional payments, maintenance of the premises, salary of the staff, etc.

Journal –A journal is a day to day record of accounting transactions.

Ledger –This can be used to prepare financial statement for the financial year. Data comes from the journal that records day to day accounting transactions.

Some more requirements that doctors should follow:

  • You should maintain daily cash register with patient details, fees charged, date of bills and medical service offered.
  • Also, what all drugs you have stocked, medicines and consumable stocked and consumed daily.

Though, as discussed above, if you have opted for presumptive scheme then you might not be required to maintain these records as keepings records is not mandatory, but it is always a good idea to maintain the records of bills, receipts, bank statements, daily expenses and incomes, etc., which can help in cross validation and also planning other finances.

Calculating annual receipts

There is no term like gross receipt or annual receipt defined particularly in the Indian income tax law. So, all the receipts and bills you have maintained for the entire year should be taken into account. However, if you have receipts from your role in academics, authorships, article contribution, these will not be included in the calculation of annual receipts or gross receipts. Just in case your other receipts are large in numbers, then we would advise you to take professional help instead of trying out own solution. You can get professional experts in taxation easily either online or offline. You should be aware what exactly you are looking for in taxation.

Is financial auditing mandatory for doctors?

There are two situations when auditing becomes compulsory. It becomes compulsory when your receipt surpasses Rs. 50 lakhs in a taxable year or when you possess receipt below Rs. 50 lakhs and you profit is less than 50% and you total earning is Rs. 2.5 lakhs and above. It is like, when your entire earning is taxable, and profits earned in below 50% of the total receipts.

How good is digital receipts in saving taxes? Can you pay lower taxes on them?

You cannot pay lower taxes on digital receipts. The assessed profit of 6% for digital receipts is available only for presumptive businesses. That means, you will have expected profit of 50% of your gross receipts, regardless of whether the receipts are digital or in cash.

Submitting profits that are higher than 50% of total receipts. Is that possible?

Submitting profits that are higher than 50% of total receipts is completely possible. Doctors can choose presumptive schemes and then declare profits of more than 50% of the total receipts. In case of your receipts being less than Rs. 50 lakhs and you spend less than 50% of the receipts. But, if your receipts are less than Rs 50 lakhs and your expenses are lower than 50% of receipts, you will find yourself saving a good amount by choosing the presumptive scheme.

GST Rate for Medical Professionals and Hospital, Doctor and Social Services

Majority of the medical services, professional, hospital and doctor are exempted from GST. An authorised medical institute or a medical practitioner or para medics are exempted from GST. Even the veterinary clinics are exempted from the GST.

Cord blood banks and all services where stem cells or any kind of medical preservation are done are exempted from GST.

Additionally, ambulance services to are exempted from GST.

But, in case the person providing medical supplies services is taxable then GST registration and filing of return is mandatory. If you find the GST matter confusing or difficult then always better to opt for GST or taxation expert service.

Which tax return do I need to file?

For presumptive income ITR-4 is applicable. In this form income from one house property, salary income can also be reported. However, if you have any capital gains income or you own more than one house property, you cannot file this form. You will have to file ITR-3.

What if you are confused?

Do not take much stress on this. Simple hire a professional who understands taxation properly and is ready to help you out in the process. It is not easy to see the minute complexities linked with taxation in India. So hire a professional to take care of your taxation accurately and also help you get maximum tax benefits.

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