Hi
1. This would be a contract to employee as consultant and not a salaried employee. The contract would be worded in that way.
2. The employee can file taxes under presumptive taxation scheme under section 44ADA.
Eligibility for filing return vide ITR4 and claim exemption of 50% u/s 44ADA
A Law Firm employees a lawyer upon execution of an "Employment Contract" for a monthly salary of Rs. 85000 pm. The law firm pays him monthly remuneration and also issues Pay Slip after deduction of TDS @10% and issues Form 16A. Notably the salary slip shows no other deduction (apart from 10%TDS), and even the employee PF is shown to be ZERO. So I have following questions: (1) Is it okay for the law firm to issue Form16A, shouldn't it be issuing Form16 instead since there exists an employment contract? (2) Can the employee file ITR4 as a professional and claim 50% benefit u/s 44ADA by way of presumptive Taxation? Or is he required to file ITR1 and pay tax on entire income?
Asked 4 years ago in Income Tax
Firm can issue form 16 or 16A depending upon treatment in the books of accounts so if they deduct TDS 10% u/s 194J then form 16A cn be issued
Employee can file ITR 4 and can claim benefit of section 44ADA.
Dear Sir,
Hope you are doing well !!
1. Yes, it is okay.
Form 16A is also a TDS Certificate. While Form 16 is for only salary income, Form 16A is applicable for TDS on Income Other than Salary. For example, a Form 16A shall be issued to you –
when a bank deducts TDS on your interest income from fixed deposits,
for TDS deducted on insurance commission,
for TDS deducted on your rent receipts.
In fact, when TDS is deducted on any other income you receive that is liable for such deduction.
2. Yes, you can take the benefit of presumptive taxation scheme u/s 44ADA.
We may assist in ITR filings.
Hi
You need to show payment for professional consultation then you can issue form 16 A
Yes they can take benefit of section 44 ADA & can file ITR 4 no need to file ITR 1
Few relevant lines of Employment Contract is worded as follows... "the first party hereby contracts with the 2nd party to hire the services of the 2nd party of the following description and on the following terms and conditions - - The 1st party recruits the services of 2nd party in relation to provision of legal expertise services and all other acts relating to, attached to and incidental to provision of legal expertise services ..." Questions: 1. So based on this wording can you confirm that the employee from IT perspective is a "Consultant" ? 2. While filing ITR4 and claiming exemption u/s 44ADA, is there a provision for employee to claim HRA? Thanks!
Asked 4 years ago
Yes, you may claim 44ADA. Also, TDS is also deducted under 194J as a professional only.
HRA cannot be claimed. However, you can claim deduction under section 80GG with max. Limit of 60k annually.
1. Yes, it would be considered as "Consultant". You can take the benefit of presumptive taxation scheme u/s 44ADA.
2. No, you cannot claim HRA.
Any employee/self-employed person who does not receive House Rent Allowance (HRA) and has not received HRA at any time during the financial year can claim deduction u/s 80GG.
The deduction under Section 80GG is given to the least of the following :
- Total rent paid minus 10% of basic salary.
- Rs 60,000 per year (Rs 5,000 per month).
- 25% of the adjusted gross total income.
1. Yes, based on above wording they can be considered as professional and use section 44ADA
2. While filling ITR 4 You can't claim HRA however you can claim Deduction u/s 80GG for Rent paid up to Rs. 5000 per month
Hello,
1. Depends upon the contract. Since the TDS deduction has been made u/s. 194J, the contract must be for your professional services as a consultant.
2. Yes, you can file ITR-4 and claim the benefits of Sec. 44ADA.
Deduction u/s. 194J and declaring the income u/s. 44ADA is far more beneficial as compared to declaring it a salary.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
1. Yes, you can declare your income as professional income u/s. 44ADA.
2. HRA exemption is not available. However, you can claim deduction u/s. 80GG for rent paid with max deduction of Rs. 60,000.
I hope this answer satisfies your requirements. It would be advisable to hire a practicing CA for the proper preparation and filing of your income tax return.
Regards,
CA Hunny Badlani
Hi
1. Yes they can taken as consultant.
2. No
My family (wife and children) are living in a separate city in a Rental house for which i pay the rent, while I am staying with my parents in my own house since my office is situated in this city. Can I claim Income tax benefit for the rent payout for my family's stay, even though my own address specified in the Income Tax return is different from the address of the Rental accommodation I have taken for my family.
Asked 4 years ago
1) The firm is paying you as professional and deducting TDS at 10% for professional services. This is fineconsidering the contract words.
2. You can file ITR 4 and declare 50% income.
3. You cannot claim HRA benefit as HRA is allowed from salary and not professional fees. No benefit is allowed for rent paid.
If the rent is paid from your bank account then yes you can claim the deduction. Address mentioned in the Income tax return has no relevance for claiming deduction.
Yes, you can claim the deduction.
Yes, you can claim the same.
Hi
Yes you can claim.
The law firm is not showing him as employee but as a independent professional.
Yes he can file ITR 4 and show minimum 50% profit.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
The language is not very clear and its a contract to hire service as a legal expert.
Didnt get your second question.
You are filing ITR 4 you cant claim benefit like this.
No, deduction shall not be available in such case.
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