194H Income

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This discussion addresses tax filing for an advocate who also runs a software consultancy and receives commission income with TDS under Section 194H. It clarifies that software consultancy income up to £50 lakh can be declared under Section 44ADA. However, commission income cannot be aggregated under Section 44AD and must be declared separately. The correct Income Tax Return (ITR) form is ITR 3, where both activities should be reported distinctly with actual profits and supporting documentation, not a presumptive 50% profit.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

04 July 2023 Respected Sir,

One of my client - Enrolled as an Advocate in Bar Council during last year.

He also runs a Software Consultancy and operating a Total T.O of Rs. 50L during previous year

Also he has Commission Income - TDS Deducted U/s 194H of Income Tax Act 1961.

I request your Advise on How to prepare Financials and File Income Tax for him

Ques 1: Can I declare his Software Consulting T.O of 50L under 44AD and declare 6 % / 8%

Ques 2: Also can i show Commission Income (TDS Deducted U/s 194H) in 44AD and declare 6% / 8%

Ques 3: What will be the Complication of Filing Business ITR for Advocates

Kindly advise

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 July 2023 1. Income from software consultancy can be declared u/s. 44ADA, provided max. TO up to Rs.50 lakhs.
2. No, commission income cannot be declared u/s. 44AD of the act.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

04 July 2023 Respected Sir,

Many Thanks for your clarifications.

Kindly advise, If Commission Income Cannot declared under 44AD

Then shall I use ITR 3 and declare the combined Gross Receipts (Software Receipts + Commission ) and Declare Actual Profit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 July 2023 You need to file ITR 3, but you cannot aggregate professional receipts and TO of commission business. You need to declare both the activities under respective tables.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

04 July 2023 Thanks much sir

And one more question please

So we need to select - 2 Business under Nature of Business

and to Declare T.O and respective Profit separately

Some Consultants saying that for Commission Income we need to declare not less than 50 % of profit - I hope it will not comes under ITR 3

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 July 2023 No need for declaration of minimum 50% profit in commission business. It should be as per actual with proofs of income and expenses incurred.

Accounts & Tax Consultant

Accounts & Tax Consultant (Querist)

05 July 2023 Respected Sir,

Thanks much for your Explanation.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

05 July 2023 You are welcome.

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