Income of a professional?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 January 2014 Is it true that if a professional such as a doctor or lawyer withdraws an amount of Rs.20,000 at a time in day from Western Union Money Transfer then the entire amount so withdrawn is liable to penalty?

Thanks in anticipation!

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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04 January 2014 no, on just withdrawal there is no tax payable.

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Querist : Anonymous

Querist : Anonymous (Querist)

04 January 2014 Thank you very much Mr.Sampat for your prompt reply...

The reason why I have posted this question is because a few days back a reputed expert stated on a news channel that if a professional such as a lawyer withdraws in cash an amount of Rs.20,000 except from a bank then the entire amount so withdrawn is liable to penalty.. Would highly appreciate if you can throw more light on whether withdrawing amount from Western Union would be a cash withdrawal and what are the tax implications on it?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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04 January 2014 there is no income as per sec 2(24) of income tax act 1961 since it is just withdrawal from bank to ur pocket in cash....so relax dont worry what u heard was false.

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Querist : Anonymous

Querist : Anonymous (Querist)

05 January 2014 I would appreciate if some other experts also put forth their views on this.

With gratitude!
Ashmita Lekhi

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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31 July 2024 The situation involving cash withdrawals and tax implications can be intricate, particularly for professionals such as doctors or lawyers. Here’s a detailed explanation of the relevant issues:

### **1. Taxation of Professional Income:**

- **Professional Income:** Professionals (doctors, lawyers, etc.) are required to report their income as per the provisions under the Income Tax Act. Income earned from professional services is generally classified under “Income from Business or Profession.”

### **2. Cash Withdrawals from Western Union:**

- **Cash Withdrawal Definition:** Cash withdrawn from Western Union or similar money transfer services is indeed considered a cash transaction. However, this transaction is typically regarded differently from cash withdrawals made directly from banks.

### **3. Regulations on Cash Transactions:**

**1. ** **Income Tax Act:**

- **Cash Transactions:** According to the Income Tax Act, any cash transaction of ₹20,000 or more is subject to certain reporting requirements and restrictions, but there is no direct penalty solely for withdrawing cash.

**2. ** **Penalties and Limitations:**

- **Section 40A(3) of Income Tax Act:**
- **Cash Payments:** Under Section 40A(3), if a taxpayer makes a payment of ₹20,000 or more in cash, it is not allowable as a deduction for business expenses, unless it is made through a proper banking channel.
- **Applicability:** This provision mainly impacts the business expenses claimed by the taxpayer, not the withdrawal itself.

- **Section 271D and 271E of Income Tax Act:**
- **Penalties for Accepting/Repaying Loans:** Under Sections 271D and 271E, penalties can be imposed if a taxpayer accepts or repays loans or deposits in contravention of the prescribed limits. This typically applies to transactions between individuals and is not directly related to cash withdrawals from money transfer services.

**3. ** **Reporting Requirements:**

- **Reporting of Cash Transactions:** The primary concern for tax authorities is the reporting of cash transactions that exceed the limits specified under the Income Tax Act. For cash transactions of ₹20,000 or more, businesses need to maintain proper records and provide details if required.

### **4. Western Union Transactions:**

- **Nature of Transactions:**
- **Cash Withdrawals:** Withdrawing cash from Western Union is similar to withdrawing cash from any other financial service provider and is subject to general cash transaction regulations.
- **Tax Implications:** There is no direct penalty on withdrawing cash from Western Union, but large cash transactions should be appropriately recorded and reported as per regulatory requirements.

### **5. Summary:**

1. **Cash Withdrawal Penalties:**
- **No Direct Penalty:** There is no specific penalty solely for withdrawing cash from Western Union or any other money transfer service if the amount withdrawn is ₹20,000 or less. However, the nature of large cash transactions may attract scrutiny.

2. **Income Reporting:**
- **Income Reporting:** Professionals should report their income accurately and ensure that all transactions are properly documented. Large cash transactions should be reported if required.

3. **Cash Transactions and Tax Compliance:**
- **Compliance:** Ensure compliance with provisions under Section 40A(3) for business expense deductions and maintain proper documentation of all cash transactions.

In conclusion, while withdrawing large amounts of cash from any source, including Western Union, is not penalized directly, it is crucial to adhere to the reporting and documentation requirements under the Income Tax Act to avoid potential issues.

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