Separation of consultation and homeopathic medicine in practice to save tax

Tax Planning Strategy

1. Segregation of Income:

   • 
     Consultation Income: Classify this as professional income, which can be taxed under Section 44ADA of the Income Tax Act. This section allows professionals to declare 50% of their gross receipts as income under the presumptive taxation scheme.
   • 
     Medicine Sales: Classify this as business income, which can be taxed under Section 44AD if your turnover is below ₹2 crores. Under this section, you can declare 8% of your gross receipts as taxable income.

2. GST Registration:

   • If your turnover crosses ₹20 lakhs, GST registration is mandatory. Since your turnover is expected to cross ₹75 lakhs, obtaining a GST number would be advisable. This also enables you to claim Input Tax Credit (ITC) on purchases.

3. Switching to a Private Limited Company:

   • If you convert your practice into a Private Limited Company, the profits will be taxed at the corporate tax rate, which is generally lower than individual tax rates. However, Section 44AD's 8% presumptive tax rate does not apply to companies.
   • 
     Corporate Tax: As of 2024-25, the corporate tax rate is around 25% for companies with a turnover of up to ₹400 crores. Consider the implications on compliance costs and regulatory requirements before transitioning to this structure.

Best regards,

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

1. Income Tax on Medicines:

• Since the sale of medicines is part of your treatment, it's better to treat the entire income (consultation and medicine) under Section 44ADA (50% presumptive income). However, if you separate the activities, you could disclose 50% of consultation income under Section 44ADA and 8% of medicine income under Section 44AD.

2. Record-Keeping:

• 
  Yes, you must maintain bills for medicine purchases and sales as part of the treatment for tax compliance.

3. Books of Accounts and Audit:

• Since your total income exceeds ₹50 lakhs, you need to maintain books of accounts and may require an audit under Section 44AB unless using presumptive taxation.

4. GST Impact:

• With turnover likely to exceed ₹75 lakhs, GST registration is mandatory. You can either absorb the GST cost or pass it on to patients. If GST-registered, you can claim Input Tax Credit (ITC) on medicine purchases.

Best regards,

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Do you have more than 5% income in the form of cash receipt or more than 5% payment in cash ?

- For consultation income, you can claim presumptive taxation scheme u/s 44ADA. Companies can not avail the benefit of presumptive taxation scheme

- For sale of medicines, maintain proper books of accounts and prepare financial statements

1. No

2. Yes 

3. Yes but audit is not applicable as turnover is less than Rs.1 cr

4. You are liable to obtain GST registration. In case of B2C sales, GST would be an additional cost for the patients