A proprietor usually gets advance payment once in 3 months for his services rendered like below
FY 2020-2021
Rs X in April 5th 2020 for services to be rendered from April 2020 to June 2020
Rs X in July 5th 2020 for services to be rendered from July 2020 to September 2020
Rs X in October 5th 2020 for services to be rendered from October 2020 to December 2020
Rs X in January 5th 2021 for services to be rendered from January 2021 to March 2021
Income = 4X
FY 2021-2022
Rs X in March 5th 2021 for services to be rendered from April 2021 to June 2021
Rs X in July 5th 2021 for services to be rendered from July 2021 to September 2021
Rs X in October 5th 2021 for services to be rendered from October 2021 to December 2021
Rs X in January 5th 2022 for services to be rendered from January 2022 to March 2022
Income 4X
FY 2022-2023
The problem: He received payment of Rs X exactly in March 31st 2022 for advance services to be performed from April 2022 to June 2022
Case1:
Income in FY 2021-2022 is 4X
Income in FY 2022-2023 is 4X
Case2:
Income in FY 2021-2022 is 5X
Income in FY 2022-2023 is 3X
Question: So how will tax be computed? case1 or case2? If it is case2 tax liability becomes huge
I know there is a form 10E 89(1) for salaried persons to declare advance salary but is there a form like that for proprietor?
Thanks
Shanthi
CAclubindia
