Tax implications of tutions and cmes?

Tax queries 424 views 12 replies

Dr.Jyothish Vijay

214 Points Joined July 2010

Please help me out in with suggestions as to what to do in the following scenario?

1) An established engineer by profession employed with a firm drawing remuneration as professional fees. He takes classes in his area of expertise occasionally for engineering students and fresh pass-outs . Should he submit the remuneration received for this purpose under the same section 44 ADA which he uses for his regular remuneration from the firm or should he show this as "income from other sources"?

A college teacher taking tuition classes would show tuition income as "income from other sources(IFOS)" as far as i know. Is the case of a professional any different?

Obviously if the engineer shows this additional remuneration as part of 44 ADA, then he can deduct a lot of expenses. But which is correct? 44 ADA/income from other sources or EITHER (as it pleases the engineer)?

2)If i am paying on someone's behalf to this person for the tuition classes taken by him (i am not his regular employer...but simply paying him at a mutually agreed rate....as we pay to the tuition teachers for our school going children). If my payment is significant, under which section should i cut TDS? Will 194J suffice? or should it be any other section?

3)If i pay via 194J and he shows it as "income from other sources", does it lead to a mismatch?

4)Is the case of a doctor conducting CME(continuing medical education) any different? Is the remuneration from CME IFOS or does it come under 194J?

Replies (12)

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

all such above incomes are part of professional income and shall be produced as professional income In tax returns

deductible professional expenses and deduction are allowed to be deducted form it

then net income will be taxable

now if option u/s 44ADA is taken then 50% of total receipt will be taxable income (no expense deduction from it )
but deduction u/s 80 will be deductible in any case

Dr.Jyothish Vijay

214 Points Joined July 2010

A college teacher taking tuition fees as a side income.... What is that then? IFOS or professional income or something else?

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

will be smart to take it as professional income

Dr.Jyothish Vijay

214 Points Joined July 2010

I understand the benefit of being able to claim expenses if classified as professional expenses. But the intent of the question is to know whether its possible or legal or justifiable if the engineer claim the side income as IFOS ? (because of certain nuances in this specific case that are beyond the scope of one single post to explain)

I have seen replies at multiple websites....some even here that tuition fees when its a side income comes under IFOS

https://www.caclubindia.com/forum/income-from-tuition-fee-202568.asp

If that is true-why a professional cannot use IFOS for the tuitions or other similar teaching endeavors that serve only as a side business/one time business?

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

it is justifiable that teaching is technical activity of passing knowledge and information

so it will be covered in ambit of profession
m
so will be more better planning to take it as professional income

no deduction allowed under ifos

definition of professional income is wider and inclusive and so it covers such income

and so it will taxable as professional income

Dr.Jyothish Vijay

214 Points Joined July 2010

ok...thank you. What you say is that while a college teacher may call tuition income as IFOS, a professional will have to call tuition fees income as "professional income" (because definition of professional income is much wider) only!

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

even some collage teacher can take it as professional income

important matter is income type
not the person who earn it

As it being nature of professional income

then to take it as professional income will smart tax planning

Dr.Jyothish Vijay

214 Points Joined July 2010

Professional income head allows deductions...something running into lakhs , saving a lot of tax.

I understand that. The question is still if its legal if someone where to take it as IFOS?

The professional here is an engineer , an architect for a firm earning a steady remuneration which he presents under section 44 ADA.

But what if earns a little side income by occassionaly indulging in teaching? He wants to claim it as IFOS-can he do it? I understand , he could use 44 ADA and could benefit from expenses deduction(but that is not what he wants). Can he claim under IFOS? Would that be legal?

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

legal

Dr.Jyothish Vijay

214 Points Joined July 2010

This unique situaton is because his usual income is close to rs.50 lakh limit. Unless he can claim the tuition fees as IFOS, he would fall out of 44 ADA (and stand to loose).

But what if this there is TDS deduction for this tuition fees under 194J-could he still make use of IFOS? (this was the second part of my original question in this post)

NIKHIL GUPTA

ARTICLE ASSISTANT

44 Points Joined December 2013

if TDS deducted in 194J then compulsory to show it in professional income

Dr.Jyothish Vijay

214 Points Joined July 2010

Originally posted by : NIKHIL GUPTA
	if TDS deducted in 194J then compulsory to show it in professional income

Therein comes the final part of my question. If he is to be able to claim it under IFOS and i am the one giving him tuition fees, under what section should i cut TDS(if not 194J)?