Income tax deduction

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CA Ankit Parekh (Querist)

10 November 2012 Experts- want your valuable opinion on below case:
A teacher retired from active service (Age 60 yrs) wants to restructure her salary so as to save maximum tax. Please note the following facts:

- She has officially retired per PF act- eligible to receive PF, gratuity and pension and also there is no more EPF deduction
- The current salary structure includes Basic and DA only (No allowances are paid)
- The school makes payment by cheque for Rs. 35K/ month as salary currently

Based on the above facts, what is the best way to pay he remuneration- (a) should it be paid out as salary itself and TDS deducted u/s 192; or (b) Should receive it under professional services, liable for TDS u/s 194J; or (c) Should receive it as payment to contractor liable for TDS u/s 194C (though per se service doesn't fit in defn for contractor) or (d) any other option available under the Income Tax Act.

I realised the best way is option (a) itself since post slab deduction min annual tax works to 17000.. However trying to explore the other options equally. Please pass me your opinion..

Many Thanks!

Amol S Joglekar

Amol S Joglekar (Expert)

11 November 2012 Mere tax planning may not be the SOLE criterion for decision making. If it is so, as RIGHTLY said by you, the first option is the BEST.

CA VISHNU GAVKARE

CA VISHNU GAVKARE (Expert)

12 November 2012 According to me taking as professional will be better so that you can claim 8% Income under 44AD and pay tax of around 3000 if 80c is utilised.

CA Ankit Parekh

CA Ankit Parekh (Querist)

12 November 2012 Thanks Vishnu and Amol.

Vishnu- I've a question though, On Section 44AD applicability.. I researched on internet and found out that Professional income does not come under the purview of this section and it only extends to Business.

Section 44AD(6) specifically excludes profession under this clause. Could you please clarify? Also does teaching profession qualify under Sec 44AA(1) under definition of "profession"?

CA VISHNU GAVKARE

CA VISHNU GAVKARE (Expert)

13 November 2012 as per 44AA teaching is not a specified profession though its a profession. hence it is open for 44Ad.

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