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Expenses on income from services

26 December 2015

I have earned an income of around 9.5L from sales services provided and have bourne expenses of about 5.5L on the same. My accountant says I can't deduct the expenses from my income and would have to pay tax on the whole amount of 9.5L. This makes very little sense and I would like to get some inputs on this.

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3 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 26 December 2015

If such expenses are for personal purpose (not for business), then cannot be deducted. Also if you are going to claim benefits u/s 44AD (if applicable in your case) then expenses cannot be deducted. Since you have not mentioned exact reason for non-deduction of expenses, I have suggested some of the possibilities.

Karan Meghani (5 Points)
Replied 27 December 2015

Hello,

There are multiple sources of income, one of which is proprietorship concern with a revenue of about 57L and then there is income from services provided. The accountant I am consulting has understated the expenses incurred by my business overall by saying that we cannot claim such high expenses as it isn't allowed. The gross margin from the proprietorship concern is about 8.5% in addition to the income from services and the total business expenses I have incurred including salaries is about 5.5L on income from both the sources.

CMA Poornima Madhava (CMA) (13097 Points)
Replied 28 December 2015

In case, you are going to avail benefits u/s 44AD (i.e presumptive income @ 8% of total turnover), then no expense can be deducted. In this case, 8% of the total turnover is considered as income and no expense can be deducted from such income. Further, you need not have to get tax audit done u/s 44AB.
However, in case you are intending to claim <8% as income, then you need to maintain books of accounts and get the tax audit done u/s 44AB if such income exceeds the exemption limit of income tax.